history of the aig

8/7/2019 History of the AIG

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INTRODUCTION TO INSURANCE

INTRODUCTION"Insurance is a contract between two parties whereby one party calledinsurer undertakes in exchange for a fixed sum called premiums, to

pay the other party called insured a fixed amount of money on thehappening of a certain event." Insurance may be described as a socialdevice to reduce or eliminate risk of life and property. Under the planof insurance, a large number of people associate themselves bysharing risk, attached to individual. With the help of Insurance, largenumber of people exposed to a similar risk makes contributions to acommon fund out of which the losses suffered by the unfortunate few,due to accidental events, are made good. Insurance is a tool by whichfatalities of a small number are compensated out of funds collectedfrom plenteous. Gradually as competition increased benefits given byindustry to its customers increased by leaps and bounds. Insurance is a

basic form of risk management which provides protection againstpossible loss to life or physical assets. Person who seeks protectionagainst such loss is termed as insured, and company that promises tohonor claim, in case such loss is actually incurred by insured, is termedas Insurer. In order to get insurance, insured is required to pay toinsurance company a certain amount called premium. Premium iscollected by insurance companies which acts as trustee to pool createdthrough contributions made by persons seeking to protect themselvesfrom common risk. Any loss to the insured in case of happening of anuncertain event is paid out of this pool. Insurance business is dividedinto four classes:

Life Insurance Fire

Marine

Miscellaneous Insurance.

Insurance provides:

Protection to investor.

Accumulation of savings.

Channeling these savings into sectors needing huge long terminvestment.

INDIAN INSURANCE INDUSTRYThe Insurance sector in India governed by Insurance Act, 1938, the LifeInsurance Corporation Act, 1956 and General Insurance Business(Nationalization) Act, 1972, Insurance Regulatory and DevelopmentAuthority(IRDA) Act, 1999 and other related Acts. With such a large populationand the untapped market area of this population Insurance happens to


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be a very big opportunity in India. Today it stands as a businessgrowing atthe rate of 15-20 per cent annually. Together with banking services, itadds about 7 per cent to the countrys GDP .In spite of all this growththe statistics of the penetration of the insurance in the country is very

poor.Nearly 80% of Indian populations are without Life insurance coverand the Health insurance. This is anindicator that growth potential for the insurance sector is immense inIndia. It was due to this immense growth that the regulations wereintroduced in the insurance sector and in continuation MalhotraCommittee was constituted by the government in 1993 to examinethe various aspects of the industry. The key element of the reformprocess was Participation of overseas insurance companies with 26%capital. Creating a more efficient and competitive financial systemsuitable for the requirements of the economy was the main ideabehind this reform. Since then the insurance industry has gone through

many sea changes .The competition LIC started facing from thesecompanies were threatening to the existence of LIC .since theliberalization of the industrythe insurance industry has never looked back and today stand as theone of the most competitive and exploring industry in India. The entryof the private players and the increased use of the new distribution arein the limelight today. The use of new distribution techniques and theIT tools has increased the scope of the industry in the longer run.

INTRODUCTION TO TATA AIG

TATA AIG INSURANCE COMPANYTata Enterprises with 82 companies, spread over seven sectors andwith an annual turnover exceeding US $8.8 billion, employs more than262,000 people. Tata Group has shown over years that it is a valuedriven company and has pioneering contributions in various fieldsincluding insurance, aviation, iron and steel. In terms of capital marketperformance as many as 40 listed Tata companies account for nearly5% of the total market capitalization of all listed companies. The Grouphas had a long association with India's insurancesector having been the largest insurance company in India prior to thenationalization of insurance.

TATA GROUP IN INSURANCE:Tata AIG General Insurance Company Ltd, and Tata AIG Life InsuranceCompany Ltd., (collectively "Tata AIG") are joint venture companiesbetween the Tata group India's most trusted industrial house andAmerican International Group, Inc. (AIG), the leading U. S. basedinternational insurance and financial services organization. The Late SirDorab Tata, was the founder Chairman of New India Assurance Co.


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Ltd., a group company incorporated way back in 1919. Government ofIndia took over the management of this company as apart of nationalization of general insurance companies in 1972. Notdeterred by the move, Tata group have ventured into riskmanagement services having tied up with AIG group, back in 1977,

with the incorporation of Tata AIG Risk Management Services Pvt. Ltd.The Tata Group is one of India's largest and most respected businessconglomerates, with revenues in 2006-07 of $28.8 billion (Rs129,994crore), the equivalent of about 3.2 per cent of the country's GDP, and amarket capitalization of $72.2 billion as on December 6, 2007. Tatacompanies together employ some 289,500 people.

AIG:American International Group, Inc. (AIG), is a major Americaninsurance corporation based at the American International Building inNew York City. The British headquarters are located on Fenchurch

Street in London, continental Europe operations are based in LaDefense, Paris, and its Asian HQ is in Hong Kong. According to the2008 Forbes Global 2000 list, AIG was the 18th-largest company in theworld.

Company Background: AIGs history dates back to 1919, whenCornelius Vander Starr established an insurance agency in Shanghai,China. Starr was the first Westerner in Shanghai to sell insurance tothe Chinese. In 1962, Starr gave management of the company's lessthan successful U.S. holdings to MauriceR. \"Hank\" Greenberg, who shifted the company's U.S. focus from

personal insurance to high.1969. American International Group, Inc isthe leading U.S. based international insurance and financial servicesorganization and the largest underwriter of commercial and industrialinsurance in the United States. Itsmember companies write a wide range of commercial and personalinsurance products through a variety of distribution channels in over130 countries and jurisdictions throughout the world. AIG's LifeInsurance operations comprise of the most extensive worldwidenetwork of any life insurer. AIG's global businesses also includefinancial services and asset management, including aircraft leasing,financial products, trading and market making, consumer finance,

savings products.

THE JOINT VENTURE:Tata AIG Life Insurance Co. Ltd. is capitalized at Rs. 185 crores ofwhich 74 per cent has been brought in by Tata Sons and the Americanpartner brings in the balance 26 per cent. Mr. George Oommen hasbeen named managing director of Tata AIG Life. Tata-AIG plans toprovide broad array of life insurance plans to cover to both individuals


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and groups. The company headquartered in Mumbai, with branchoperations in Delhi, Chennai, Hyderabad, Bangalore Calcutta, Pune andChandigarh.

ABOUT TATA-AIG:

Tata AIG Insurance Solutions is one of the leading insurance companiesthat provide both life insurance as well as general insurance. Thispioneer company is a joint collaboration between the AmericanInternational Group, Inc. (AIG) and Tata Group. They own the companyin the ratio of 26:74. It is a leading financialinstitution that has carved a niche for itself all over the world. Tata AIGInsurance provides facilities to both corporate and individuals. Startingits operations on April 1, 2001, it seeks to serve different categories ofpeople. It acquired its license for carrying out operations in India onFebruary 12, 2001. Tata AIG Insurance Solutions is one of the mostprestigious organizations in the business world. It employs thousands

of employees and offers various opportunities to people to build aprospective career. As a leading name in the financial world, itidentifies the potential and experience of the individual. This insurancecompany identifies the clients needs and works accordingly. Itstresses on innovative aspect and opening of new markets. It believesin new economy and latest Internet technology. Tata AIG Insuranceoffers a number of products forthe General Insurance holders. General insurance products include:

Individual insurance

Small business insurance

Corporate insurance

Tata AIG Insurance offers flexible life insurance to the individuals,business organization and other association. For the corporate, thereare various insurance products like group pensions, employee benefits,work place solutions and credit life. For the individuals, Tata AIGInsurance offers various products for adults, children and forretirement planning.

DIFFERENT PLANS IN TATA AIG

1. Individual Plan

2. Children plan

3. Assure Career Builder4. LIFE Plus

5. Tata AIG Health First


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WHAT IS MOTIVATION

Motivation is the inner power or energy that pushes toward acting, performing actions

and achieving. Motivation has much to do with desire and ambition, and if they areabsent, motivation is absent too.

Often, a person has the desire and ambition to get something done or achieve a certaingoal, but lacks the push, the initiative and the willingness to take action. This is due to

lack of motivation and inner drive.

Motivation strengthens the ambition, increases initiative and gives direction, courage,

energy and the persistence to follow one's goals. A motivated person takes action anddoes whatever it needs to achieve his/her goals.

Motivation becomes strong when you have a vision, a clear mental image of what youwant to achieve, and also a strong desire to materialize it. In this situation motivation

awakens and pushes you forward, toward taking action and making the vision a reality.

Motivation can be applied to every action and goal. There could be motivation to study aforeign language, to get good grades at school, bake a cake, write a poem, take a walk

every day, make more money, get a better job, buy a new house, own a business, or

become a writer, a doctor or a lawyer. Motivation is present whenever there is a clearvision, precise knowledge of what one wants to do, a strong desire and faith in one's

abilities.

Motivation is one of the most important keys to success. When there is lack of motivationyou either get no results, or only mediocre results, whereas when there is motivation youattain greater and better results and achievements. Compare a student who lacks

motivation and who hardly studies, to a student who is highly motivated, and who

devotes many hours to his studies; they will get absolutely different grades.

Lack of motivation shows lack of enthusiasm, zest and ambition, whereas the possessionof motivation is a sign of strong desire, energy and enthusiasm, and the willingness to do

whatever it takes to achieve what one sets out to do. A motivated person is a happier

person, more energetic, and sees the positive end result in his/her mind.

IMPORTANCE OF MOTIVATION

Puts human resources into action

Every concern requires physical, financial and human resources to accomplish the

goals. It is through motivation that the human resources can be utilized by makingfull use of it. This can be done by building willingness in employees to work. This

will help the enterprise in securing best possible utilization of resources.


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Improves level of efficiency of employees

The level of a subordinate or a employee does not only depend upon his

qualifications and abilities. For getting best of his work performance, the gapbetween ability and willingness has to be filled which helps in improving the level

of performance of subordinates. This will result into-

a. Increase in productivity,

b. Reducing cost of operations, andc. Improving overall efficiency.

Leads to achievement of organizational goals

The goals of an enterprise can be achieved only when the following factors take

place :-

d. There is best possible utilization of resources,

e. There is a co-operative work environment,

f. The employees are goal-directed and they act in a purposive manner,g. Goals can be achieved if co-ordination and co-operation takes place

simultaneously which can be effectively done through motivation.Builds friendly relationship

Motivation is an important factor which brings employees satisfaction. This canbe done by keeping into mind and framing an incentive plan for the benefit of the

employees. This could initiate the following things:

h. Monetary and non-monetary incentives,i. Promotion opportunities for employees,

j. Disincentives for inefficient employees.

In order to build a cordial, friendly atmosphere in a concern, the above steps

should be taken by a manager. This would help in:

i. Effective co-operation which brings stability,ii. Industrial dispute and unrest in employees will reduce,

iii. The employees will be adaptable to the changes and there will be no

resistance to the change,iv. This will help in providing a smooth and sound concern in which

individual interests will coincide with the organizational interests,

v. This will result in profit maximization through increased productivity.Leads to stability of work force

Stability of workforce is very important from the point of view of reputation and

goodwill of a concern. The employees can remain loyal to the enterprise only

when they have a feeling of participation in the management. The skills andefficiency of employees will always be of advantage to employees as well as

employees. This will lead to a good public image in the market which will attract


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competent and qualified people into a concern. As it is said, Old is gold which

suffices with the role of motivation here, the older the people, more the

experience and their adjustment into a concern which can be of benefit to theenterprise.

From the above discussion, we can say that motivation is an internal feeling which can beunderstood only by manager since he is in close contact with the employees. Needs,

wants and desires are inter-related and they are the driving force to act. These needs canbe understood by the manager and he can frame motivation plans accordingly. We can

say that motivation therefore is a continuous process since motivation process is based on

needs which are unlimited. The process has to be continued throughout.

We can summarize by saying that motivation is important both to an individual and abusiness. Motivation is important to an individual as:

1. Motivation will help him achieve his personal goals.

2. If an individual is motivated, he will have job satisfaction.3. Motivation will help in self-development of individual.

4. An individual would always gain by working with a dynamic team.

Similarly, motivation is important to a business as:

1. The more motivated the employees are, the more empowered the team is.

2. The more is the team work and individual employee contribution, more profitableand successful is the business.

3. During period of amendments, there will be more adaptability and creativity.

4. Motivation will lead to an optimistic and challenging attitude at work place.

THE IMPORTANCE OF MOTIVATION.

A. The key to leadership success is MOTIVATING OTHERS TO DO THEIRBEST.

1. The importance of satisfaction in the workforce cannot beoverstated.

a. Losing an employee can cost over $100,000.b. Motivating the right people to join and remain with the

organization is a key function of managers.2. People are motivated by a variety of things.

a. An INTRINSIC REWARD is the good feeling you have whenyou have done a good job.b. An EXTRINSIC REWARD is something given to you by

someone else as recognition for good work and include payincreases, praise, and promotions.

3. MOTIVATION, the drive to satisfy a need, ultimately comes fromWITHIN AN INDIVIDUAL.


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4. The purpose of this chapter is to help you learn how to stimulatepeople and bring out that natural drive to do a good job.

5. The job of a manager is to find each workers commitment,encourage it, and focus it on some common goal

B. EARLY MANAGEMENT STUDIES (TAYLOR).

1. FREDERICK TAYLOR is known as the "FATHER OF SCIENTIFICMANAGEMENT."a. His book The Principles of Scientific Managementwas

published in 1911.b. TAYLORS GOAL was to INCREASE PRODUCTIVITY by

studying the most efficient ways of doing things and thenteaching workers these methods.

c. The way to improve productivity was to scientifically studythe most efficient way to do things then teach people thosemethods (SCIENTIFIC MANAGEMENT.)

d. THREE ELEMENTS of his approach were: TIME,

METHODS, and RULES OF WORK.e. TIME-MOTION STUDIES break down the tasks needed todo a job and measure the time needed to do each task.

2. Henry L. Gant, on of Taylors followers, developed GANTTCHARTS by which managers plotted the work of employees a dayin advance.

3. FRANK AND LILLIAN GILBRETH used Taylors ideas in thePRINCIPLE OF MOTION ECONOMYbreaking down every jobinto a series of motions (therbligs) and then analyzing each motionto make it more efficient.

4. SCIENTIFIC MANAGEMENT viewed people as MACHINES that

needed to be properly programmed.a. There was little concern for the psychological or humanaspects of work.

b. Much emphasis in some companies is still placed onconformity to work rules rather than on creativity, flexibility,and responsiveness.

C. THE HAWTHORNE STUDIES (MAYO.)1. The HAWTHORNE STUDIES were conducted by Elton Mayo at the

WESTERN ELECTRIC COMPANYs Hawthorne plant in Cicero,Illinois.

a. Begun in 1927, the studies ended six years later.b. The PURPOSE of the studies were to DETERMINE THE

BEST LIGHTING for optimum productivity.c. The PRODUCTIVITY of the experimental group

INCREASED compared to the control group whether thelighting was bright or dim.

d. These results confused the researchers, who had expectedproductivity to fall as the lighting was dimmed.


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2. A second series of studies were conducted to see ifOTHERFACTORS, such as temperature and humidity, contributed toincreased production.

a. PRODUCTIVITY INCREASED during each of the 13experimental periods.

b. When conditions were returned to their original status(before the studies were started), PRODUCTIVITYCONTINUED TO GO UP. Why?

3. Mayo hypothesized that HUMAN orPSYCHOLOGICAL FACTORScaused the increases:

a. The workers in the test room thought of themselves as aSOCIAL GROUP.

b. The workers were involved in the PLANNING of theexperiments.

c. The workers enjoyed the SPECIAL ATMOSPHERE andADDITIONAL PAY for the increased productivity.

4. The term HAWTHORNE EFFECT refers to the tendency for peopleto behave differently when they know theyre being studied.a. The Hawthorne studies results encouraged researchers TO

STUDY HUMAN MOTIVATION and the MANAGERIALSTYLES that lead to more productivity.

b. Mayos findings led to NEW ASSUMPTIONS ABOUTEMPLOYEES.

c. MONEY was found to be a relatively LOW MOTIVATOR.

MOTIVATION AND MASLOWS HIERARCHY OF NEEDS.

A. ABRAHAM MASLOW believed that MOTIVATION ARISES FROMNEED.1. One is motivated to satisfy unmet needs.2. Satisfied needs NO LONGER MOTIVATE.

B. Maslow placed needs on a HIERARCHY of importance:1. PHYSIOLOGICAL NEEDS: Basic survival needs including the

need to drink, eat, and be sheltered from heat and cold.2. SAFETY NEEDS: The need to feel secure at work and at home.3. SOCIAL NEEDS: The need to feel loved, accepted, and part of the

group.4. ESTEEM NEEDS: The need for recognition and acknowledgment

from others, as well as self-respect and a sense of status.5. SELF-ACTUALIZATION NEEDS: The need to develop to yourfullest potential.

C. When one need is satisfied, another, higher-level need emerges to besatisfied.

1. A SATISFIED NEED is no longer a motivator.2. Lower-level needs, however, can pop up at any time and take

attention away from higher-level needs.


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D. APPLYING MASLOWS THEORY1. The text relates how Andrew Grove, president of Intel, uses

Maslows concepts to motivate employees in his firm.2. Once one understands the need level of employees, it is easier to

design programs that will trigger self-motivation.

MCGREGORS THEORY X AND THEORY Y

A. DOUGLAS MCGREGOR categories managers by THEIR ATTITUDESwhich lead to different managerial styles: THEORY X and THEORY Y.

B. THEORY X.1. The ASSUMPTIONS of Theory X management are:

a. The average person DISLIKES WORK and will avoid it ifpossible.

b. Because of this dislike, the average person must beFORCED, CONTROLLED, DIRECTED, OR THREATENED

WITH PUNISHMENT TO BE MOTIVATED to put forth theeffort to achieve the organizations goals.c. The average worker prefers to be directed, wishes TO

AVOID RESPONSIBILITY, has relatively LITTLEAMBITION, and wants SECURITY.

d. Primary motivators are FEAR and MONEY.2. The CONSEQUENCE OF SUCH ATTITUDES is a manager who is

very "busy."a. Motivation is more likely to take the form ofPUNISHMENT

for bad work rather than REWARD for good work.b. Theory X managers give workers little responsibility,

authority, or flexibility.c. Those were the assumptions behind Taylors scientificmanagement

C. THEORY Y.1. THEORY Y

makes entirely different ASSUMPTIONS about people:

a. Most people LIKE WORK; it is as natural as play or rest.b. Most people NATURALLY WORK TOWARD GOALS to

which he or she is committed.

c. The depth of a persons commitment to goals depends onthe perceived REWARDS for achieving them.d. Under certain conditions, most people not only accept but

SEEKS RESPONSIBILITY.e. People are capable of using a high degree of

IMAGINATION, CREATIVITY, and CLEVERNESS to solveproblems.


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f. In industry, the average persons INTELLECTUALPOTENTIAL IS ONLY PARTIALLY REALIZED.

g. People are MOTIVATED BY A VARIETY OF REWARDS.Each worker is stimulated by a reward unique to that worker(time off, money, recognition, etc.)

2. Theory Y emphasizes a relaxed managerial atmosphere in whichworkers are free to set objectives and be flexible.3. EMPOWERMENT is a key technique in meeting these objectives.

To be a real motivator, empowerment requires management to:a. Find out what people think the problems in the organization

are.b. Let them design the solutions.c. Get out of the way and let them put those solutions into

action.4. The trend in many U.S. businesses is toward Theory Y

management.

OUCHIS THEORY Z.

A. Another reason for a more flexible managerial style is to meet competitionfrom foreign firms.

B. In the 1980s WILLIAM OUCHI researched how corporations in Japan arerun differently from U.S. companies.

1. The Japanese management approach, called TYPE J, involved:a. Lifetime employment.b. Consensual decision making.c. Collective responsibility for the outcomes of decisions.

d. Slow evaluation and promotion.e. Implied control mechanisms.f. Nonspecialized career paths.g. Holistic concern for employees.

2. The American management approach, called TYPE A, involved:a. Short-term employment.b. Individual decision making.c. Individual responsibility for the outcomes of decisions.d. Rapid evaluation and promotion.e. Explicit control mechanism.f. Specialized career paths.g. Segmented concern for employees.

3. Type J firms are based on the culture of Japan; Type A firms arebased on the culture of America.

4. Ouchi realized that American managers could not be expected toaccept a concept based on another culture.

5. Ouchi recommended a hybrid of the two approaches, THEORY Z.a. Long-term employment.b. Collective decision making.


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c. Individual responsibility for the outcome of decisions.d. Slow evaluation and promotion.e. Moderately specialized career path.f. Holistic concern for employees.

C. Today economic changes are forcing Japanese managers to reevaluate

their management styles.1. Today there is a realization that Japanese firms need to becomemore efficient.

2. Some Japanese managers are changing the way they do business.3. Many managers think that conformity has hurt Japanese business.

Many managers think that conformity has hurt Japanese business.

D. THEORIES X, Y, AND Y are CONCERNED WITH MANAGEMENT

STYLES.

1. Another theory looks at what managers can do with the jobitself to motivate employees.

2. FREDERICK HERZBERGS work is CONCERNED IS WITHTHE CONTENT OF WORK rather than style ofmanagement.

B. Frederick HERZBERG surveyed workers to find out how they RANK JOB-RELATED FACTORS. The results were:

1. Sense of achievement.2. Earned recognition.

3. Interest in the work itself.4. Opportunity for growth.5. Opportunity for advancement.6. Importance of responsibility.7. Peer and group relationships.8. Pay.9. Supervisors fairness.10.Company policies and rules.11.Status.12.Job security.13.Supervisors friendliness.14.Working conditions.

C. Herzberg noted that the HIGHEST RANKING FACTORS DEALT WITHJOB CONTENT.

1. He referred to these as MOTIVATORS since they gaveemployees a great deal of satisfaction.

2. They include the work itself, achievement, and responsibility.D. The OTHER FACTORS had to do with JOB ENVIRONMENT.


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1. They could CAUSE DISSATISFACTION If them weremissing but NOT NECESSARILY MOTIVATION if theyincreased.

2. These so called HYGIENE FACTORS

include working conditions and salary.

E. APPLYING HERZBERGS THEORIES1. The text offers several current examples of Herzbergs

theories in action, including Kingston Technology andSunnen Products.

2. These firms believe that the best motivator for someemployees is a simple "Thanks, I really appreciate whatyoure doing."

3. Further surveys support his finding that the number onemotivator is not money, but a sense of achievement and

recognition.4. One study identified lack of enough praise and recognitionas the primary reason employees leave their job.

5. There is a good deal of similarity in Maslows hierarchy andHerzbergs two-factor theory.

JOB ENRICHMENT.

A. JOB ENRICHMENT is a motivational strategy that emphasizes motivatingthe worker through the job itself.

B. The FIVE CHARACTERISTICS of work believed to be IMPORTANT IN

AFFECTING MOTIVATION AND PERFORMANCE are:1. SKILL VARIETY, the extent to which a job demands different skillsof the person.

2. TASK IDENTITY, the degree to which the job requires doing a taskwith a visible outcome from beginning to end.

3. TASK SIGNIFICANCE, the degree to which the job has asubstantial impact on the lives of others in the company.

4. AUTONOMY, the degree of freedom, independence, and discretionin scheduling work and determining procedures.

5. FEEDBACK, the amount of direct, clear information received aboutjob performance.

C. The text uses the examples of Herb Kelleher of Southwest Airlines, andRoger Sant if AES.D. OTHER JOB DESIGNS

1. JOB SIMPLIFICATION produces task efficiency by breaking downthe job into simple steps, sometimes necessary with peoplelearning new skills.

2. JOB ENLARGEMENT combines a series of tasks into oneassignment that is more challenging and motivating.


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3. JOB ROTATION makes work more interesting by movingemployees from one job to another

GOAL-SETTING THEORY AND MANAGEMENT BY OBJECTIVES.

A. GOAL-SETTING THEORY is based on setting specific, attainable goals.1. This will lead to high motivation and performance if the goals areaccepted, accompanied by feedback, and facilitated byorganizational conditions.

2. Peter Drucker developed such a system in the 1960s calledMANAGEMENT BY OBJECTIVES (MBO.)

B. MANAGEMENT BY OBJECTIVES (MBO) is an example of goal-setting.1. Management by Objectives was developed to HELP EMPLOYEES

MOTIVATE THEMSELVES.2. MBO is a system of goal setting and implementation that involves a

cycle of discussion, review, and evaluation of objectives among all

levels of management and employees.3. There are six steps in the MBO process.4. Some critics see MBO as being out of date and inconsistent with

contemporary management thought.5. Almost one-half of firms surveyed, however use some form of

MBO.C. Management by objectives is most effective in relatively stable situations.

1. It is important to understand the difference between helping andcoaching subordinates because helping tends to makesubordinates weak and dependent while coaching makes them feelcapable and part of the team.

2. HELPING is working with the subordinate, even doing part of thework if necessary.3. COACHING means acting as a resourceteaching guiding,

recommendingbut not helping by doing the task.4. Problems can arise when management uses MBO as a strategy for

FORCING managers to commit to goals that are not mutuallyagreed upon.

MEETING EMPLOYEE EXPECTATIONS: EXPECTANCY THEORY.

A. According to VICTOR VROOMs EXPECTANCY THEORY, employee

expectations can affect an individuals motivation.1. The amount of effort employees exert on a specific task dependson their expectations of the outcome.

2. Vroom contends that employees ask three questions beforecommitting maximum effort to a task:

a. Can I accomplish the task?b. If I do accomplish it, whats my reward?c. Is the reward worth the effort?


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3. Expectation varies from individual to individual.B. FIVE STEPS TO IMPROVE EMPLOYEE PERFORMANCE:

1. Determine what rewards are valued by employees.2. Determine the employees desired performance standard.3. Ensure performance standards are attainable.

4. Guarantee rewards are tied to performance.5. Be certain rewards are considered adequate.

TREATING EMPLOYEES FAIRLY: EQUITY THEORY.

A. The basic principle ofEQUITY THEORY is that workers try to maintainequity between inputs and outputs compared to people in similarpositions.

B. When workers do perceive inequity, they will try to reestablish equitableexchanges.

1. They can reduce or increase their efforts or rationalize the situation.

2. In the workplace, inequity leads to lower productivity leads to lowerproductivity, reduced quality, increased absenteeism, and voluntaryresignation.

C. Equity judgements are based on perceptions, and are therefore subject toerrors in perception.

1. Organizations can try to deal with this by keeping salaries secret.2. However, the best remedy, in general, is clear and frequent

communication.

BUILDING TEAMWORK THROUGH OPEN COMMUNICATION.

Explain how open communication builds teamwork, and describe how managersare likely to motivate teams in the future.

A. Companies with highly motivated workforces usually have opencommunication systems and self-managed teams.

1. Communication must flow freely when teams are empowered tomake decisions.

2. Also, most learning happens at the peer level.3. Empowerment works when people share their knowledge with their

peers.B. PROCEDURES FOR ENCOURAGING OPEN COMMUNICATION

INCLUDE:1. Create an organizational culture that rewards listening.2. Train supervisors and managers to listen.3. Remove barriers to open communication.4. Actively undertake efforts to facilitate communication.

C. APPLYING OPEN COMMUNICATION IN SELF-MANAGED TEAMS.


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1. The text offers several examples of communication amongmembers of self-managed teams in such organizations as FORDMOTOR COMPANY.

2. For companies to implement such groups, managers must RE-INVENT WORK.

D. CHANGING ORGANIZATIONS IS NOT EASY.1. MANY MANAGERS WERE TRAINED UNDER A DIFFERENTSYSTEM.

a. Many are used to telling people what to do rather thanconsulting them.

b. It is difficult for such managers to change.2. Employees often have a difficult time changing as well, and some

have trouble getting involved in participative management.E. A MODEL FOR THE FUTURE: EMPLOYEE EMPOWERMENT.

1. The text tells the story ofMILLER BREWING COMPANY andMARY KAY COSMETICS as an example of a company that

successfully created an efficient and effective team.2. Understanding what motivates employees is the key to success ingoods-producing companies such as MILLER BREWINGCOMPANY and service-based firms such as MARK KAYCOSMETICS.

F. The lessons learned from these companies include:1. The future growth of industry depends on a motivated, productive

work force.2. Motivation is largely internally generated by workers themselves.3. The first step in any motivational program is to establish open

communications.

MOTIVATION IN THE FUTURE

A. Employees are not alikedifferent employees respond to differentmanagerial and motivational styles.

B. Tomorrows managers will not be able to use any one formula for allemployees.

C. They will need to work with each employee as an individual and fit themotivational effort to that individual.

D. Different cultures experience motivational approaches differently.E. Cultural differences also apply to generations:

1. Baby boomers (born between 1946 and 1964) experiencedeconomic prosperity and optimism about the future.

2. Generation X (born between 1965 and 1980) were raised with dual-career families and insecurity about a life-long job.

3. Boomer managers need to be flexible with Gen X employees.4. Gen Xers focus on career security, not job security, and are willing

to change jobs to do it.


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F. Gen Xers focus on career security, not job security, and are willing tochange jobs to do it.

G. Managers need to give workers what they need to do a good jobtheright tools, the right information, and the right amount of cooperation.

The motives behind motivation

In Mike Poundfords letter featured in the People Management Magazine commenting onRob Briners Terms of engagement column and Engaged in conversation feature, 30

July 2009 it states that engagement is a voluntary act and that the organisation can not

engage people, it is up to the individual. The letter highlights that there are a numerousreasons why it is up to the employee e.g. financial, social and ethical reasons.

Without seeing the original feature I cant really comment fully on the complete featurebut ending in the letter with personal aspirations are aligned with organisational

purpose signalling that engagement is difficult for an employer to drive. I believe ithighlights another reason why motivation is one of the main aspects of HR, if an

employee is motivated it does result in engagement.

Motivation is still not just about pay

Published recently in the People Management magazine issues were highlighted in and

with the NHS Agenda for Change pay contract. The new pay system for NHS staff failedto deliver cost saving or an increase in productivity, according to the National Audit

Office.

A report by the spending watchdog said that productivity in the NHS continued to falldespite the introduction of the new Agenda for Change pay contract.

It amazes me that many HR professionals still believe new pay changes will increase

employees motivation/productivity. Whether we like it or not most employees believe

that they are due a pay increase year on year, the main argument being down to inflation.Pay raises also show that the business is in a strong position.

We are currently in a difficult situation with the state of the economy and I believe this

makes certain aspects of HR easier. It would be quite brutal for an employer to tell its

employees that having a job during the recession is a motivational factor but in honesty itwould be close to the truth. Personally, I believe that at a time when businesses are

spending money more wisely it would be better to use this basic approach and build on it

to develop a true motivational scheme.
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Employees have a vast range of needs and if an employer wants to work with the

employee then they will motivate them without spending money.

How Many Different Types Of Motivation Are There?February 29th, 2008 by daveaudley

I believe that there are three main types of motivation Natural, Fear, Booster,

which are each driven by two sub types Attitude and Incentive.

Natural motivation is the most common type of motivation and happens the most often.It is the motivation people get when naturally motivated.

Fear motivation happens often within the workforce when under pressure to complete a

task.

Booster motivation is normally self driven to overcome a task you have set yourself.

Two Types Of MotivationJanuary 26th, 2008 by daveaudley

Motivating an employee is a daily task for managers, but it is important to recognise the

two sides of motivation

Attitude Motivation Thinking and Feeling&

Incentive Motivation Providing a reward.

When planning to motivate an employee Attitude Motivation and Incentive

Motivation need to be utilised in harmony to fulfil maximum motivation.

Attitude Motivation should be used during the task and Incentive Motivation appliedtowards the end. Therefore as the employee carries out the whole task they are motivated

at each stage.

What you use to motivate your employees will change depending on the conditions of the

task in hand e.g. time length and desired affect from the motivation.

Incentive Motivation will tend to comprise of small but more meaningful solutions e.g.Once you have completed all the preparation for the team meeting, you can have the

afternoon off.

Attitude Motivation will tend to comprise of a wider range of solutions thatindividually would have a smaller affect e.g. In order to complete all the preparation for

the meeting, you can use the administrator to help put together the presentation and we

will cover your normal duties.
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When both types of motivation are used together they make it achievable to fulfill your

employees motivation level.

Why is Employee Motivation Important?

Why is employee motivation important to team and company success? Partly because itsabsence can cost a company a lot of money.

Employee motivation should be at the forefront of all managers work strategies.

This is because youll want to marry the goals of the company with the goals of your

employees to ensure maximum productivity and to make the workplace run as efficiently

as possible.

Employee Motivation Strategies

In order to understand whats required to motivate your employees, its important that

you get to understand what drives your workforce.

Naturally, some kind of employee incentives scheme with a rewards based employee

motivation programme is one way of achieving the kind of results you desire.

However, its also important to remember that employees are not solely motivated by

money or other financial incentives.

There are many ways to reward employees and many different types of employeerecognition and motivation schemes you may wish to introduce.

Why is Employee Motivation Important?

Firstly, as a company owner or manager, its not necessarily going to be the case that all

of your workers are going to be as motivated as you are. Thats only natural. You have

far more to gain (and to lose) if you own the company or are one of its leaders.

Whilst there will be some workers who are naturally motivated, there will be others whorequire some kind of stimulus if youre ever going to get them to be as productive as you

want them to be.

So one answer to the question why is employee motivation important? is that a

motivated team, you can never hope to achieve the desired results for your company.Remember the old adage you can lead a horse to water, but you cant make it drink.


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Employee Motivation Techniques You Should Consider

Employee motivation doesnt just rely on there being some kind of employee motivation

scheme in place. Youll need to look at all areas which can affect motivation in general.An effective employee motivation programme can include:

Effective discipline

Treating the workforce fairly and equally

Satisfying workers needs

Setting achievable goals that are related to the tasks to be completed

Positive reinforcement

Providing rewards and employee incentives

Myths About Motivation

Some companies have their own preferred methods for trying to encourage and increase

employee motivation. The trouble is many of the strategies they adopt are either outdatedor are as a result of misguided opinions.

These include companies who think that by instilling fear into employees and ruling withan iron rod that this will force the employees into doing things the way the company

wants.

This only ever works in the extreme short term as the worker will inevitably look for

another job if they feel theyre being mistreated.

Bosses who think that whatever they find motivating must also motivate the workforce

are also misguided. A lot of the time, therefore, a boss will introduce an employeemotivation scheme with a large emphasis on financial incentives as its often the pursuit

of profit that a boss is interested in.

However, what they sometimes fail to remember is that workers are motivated by very

different things. For some, its the possibility of career development and promotion. For

others, it may be a better work/life balance with, perhaps, the possibility of working

flexitime or from home occasionally.

Ultimately, its a case of getting to understand the needs of your workforce and what

motivates them both individually and collectively if you want to increase employee

motivation and have your company thrive and prosper.

The importance of employee motivation, therefore, lies in the fact that an unmotivatedworkforce will inevitably result in lower productivity, lower staff retention and more

sickness absence all of which can cost a company a lot of money.


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TYPES OF MOTIVATIONAL INCENTIVES

Incentive is an act or promise for greater action. It is also called as a stimulus to greateraction. Incentives are something which are given in addition to wagers. It meansadditional remuneration or benefit to an employee in recognition of achievement or better

work. Incentives provide a spur or zeal in the employees for better performance. It is a

natural thing that nobody acts without a purpose behind. Therefore, a hope for a reward is

a powerful incentive to motivate employees. Besides monetary incentive, there are someother stimuli which can drive a person to better. This will include job satisfaction, job

security, job promotion, and pride for accomplishment. Therefore, incentives really can

sometimes work to accomplish the goals of a concern. The need of incentives can bemany:-

1. To increase productivity,2. To drive or arouse a stimulus work,

3. To enhance commitment in work performance,4. To psychologically satisfy a person which leads to job satisfaction,

5. To shape the behavior or outlook of subordinate towards work,

6. To inculcate zeal and enthusiasm towards work,7. To get the maximum of their capabilities so that they are exploited and utilized

maximally.

Therefore, management has to offer the following two categories of incentives to

motivate employees:-

1. Monetary incentives- Those incentives which satisfy the subordinates byproviding them rewards in terms of rupees. Money has been recognized as a chief

source of satisfying the needs of people. Money is also helpful to satisfy the social

needs by possessing various material items. Therefore, money not only satisfiespsychological needs but also the security and social needs. Therefore, in many

factories, various wage plans and bonus schemes are introduced to motivate and

stimulate the people to work.2. Non-monetary incentives- Besides the monetary incentives, there are certain

non-financial incentives which can satisfy the ego and self- actualization needs of

employees. The incentives which cannot be measured in terms of money are

under the category of Non- monetary incentives. Whenever a manager has tosatisfy the psychological needs of the subordinates, he makes use of non-financial

incentives. Non- financial incentives can be of the following types:-

a. Security of service- Job security is an incentive which provides greatmotivation to employees. If his job is secured, he will put maximum

efforts to achieve the objectives of the enterprise. This also helps since he

is very far off from mental tension and he can give his best to theenterprise.


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b. Praise or recognition- The praise or recognition is another non- financial

incentive which satisfies the ego needs of the employees. Sometimes

praise becomes more effective than any other incentive. The employeeswill respond more to praise and try to give the best of their abilities to a

concern.

c. Suggestion scheme- The organization should look forward to takingsuggestions and inviting suggestion schemes from the subordinates. This

inculcates a spirit of participation in the employees. This can be done by

publishing various articles written by employees to improve the workenvironment which can be published in various magazines of the

company. This also is helpful to motivate the employees to feel important

and they can also be in search for innovative methods which can be

applied for better work methods. This ultimately helps in growing aconcern and adapting new methods of operations.

d. Job enrichment- Job enrichment is another non- monetary incentive in

which the job of a worker can be enriched. This can be done by increasing

his responsibilities, giving him an important designation, increasing thecontent and nature of the work. This way efficient worker can get

challenging jobs in which they can prove their worth. This also helps inthe greatest motivation of the efficient employees.

e. Promotion opportunities- Promotion is an effective tool to increase the

spirit to work in a concern. If the employees are provided opportunities for

the advancement and growth, they feel satisfied and contented and theybecome more committed to the organization.

The above non- financial tools can be framed effectively by giving due

concentration to the role of employees. A combination of financial and non-

financial incentives help together in bringing motivation and zeal to work in aconcern.

Positive Incentives

Positive incentives are those incentives which provide a positive assurance for fulfillingthe needs and wants. Positive incentives generally have an optimistic attitude behind and

they are generally given to satisfy the psychological requirements of employees. For

example-promotion, praise, recognition, perks and allowances, etc. It is positive bynature.

Negative Incentives

Negative incentives are those whose purpose is to correct the mistakes or defaults of

employees. The purpose is to rectify mistakes in order to get effective results. Negativeincentive is generally resorted to when positive incentive does not works and a

psychological set back has to be given to employees. It is negative by nature. For

example- demotion, transfer, fines, penalties.


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We know that motivation programmes can have a dramatic effect on sales and also on

staff morale, but there are several issues that need to be addressed to ensure that such ascheme will work.

Firstly, proper planning at the start will establish what you want to achieve. Then decide

who your scheme is aimed at and whether the structure exists to run, measure the scheme

and to communicate its key messages.

Participants of the scheme will want answers to questions such as:

a) What do I have to do?

b) How do I do it?

c) How am I getting on?

d) What are the rewards?

Good communication is vital to convey every detail, and avoid misunderstandings from

the start. Involvement of senior personnel is also instrumental in driving forward yourscheme and it's also advisable to elect a project leader to co-ordinate activity and to

answer queries.

Your programme should be aligned to your business objectives in terms of improvementsin customer service, increase in efficiency or productivity, and deciding what you need to

achieve will help in determining your target audience. If your scheme is spread across the

company, consider how departments will inter-relate and how you will communicate with

personnel working in disparate parts of the organisation.

Profiling the target audience is vital, particularly so when devising a motivation scheme.

Age range, gender, hobbies and interests, marital status and salary bands are an integral

issue, as is dividing participants into groups, based on job profile, level of responsibility,

salary level and whether participants work full or part-time. Profiling will help ensure

that you provide a relevant and aspirational reward to suit the individual: after all, whatappeals to a 25-year-old single man may not be as exciting to a 45-year-old woman with

family.

But the four key elements in any incentive scheme have to be:

Communication

Recognition


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Measurement

Reward

A motivation programme should be easy to understand, and good communication usingposters, newsletters etc will help facilitate this. Invest some of the budget in materials that

will get your message across, and launch the programme with as much panache asbudgets permit, notifying everyone of their targets. Set a realistic date for the launch, and

preview with an announcement. And don't forget to brief department managers, askingthem to simultaneously speak to their teams.

Ensure you communicate regularly using more than one medium, ie. company email and

weekly/monthly meetings. Update participants regularly on progress, and remind them of

the rewards available to maintain enthusiasm. But ensure that once you startcommunicating progress, you maintain it.

Everyone loves a public pat on the pack, so publicise good news stories at presentations

or conferences, as recognition helps maintain the scheme's momentum, and participants'enthusiasm.

Another useful idea is to measure performance via sales and revenue reports, and also by

customer service feedback forms. If possible, adapt existing reporting tools and establish

a cut-off date for each performance period. Break the year up into quarters and report inthat way. Offer interim awards for those who reach quarterly targets (remembering to

take into account seasonal workflows) and give a major award at the year end for best

overall performance.

Your reward budget should be 65-80% of your total budget and should relate to

participants' basic earnings. A decision should also be taken on whether the reward iscapped or open-ended and give an accelerator in the first month/quarter to get the scheme

off to a blazing start.

But, above all, the reward must be exciting and attainable and fall within your budgetparameters. This is where retail vouchers come into their own, as they provide such a

wide choice of goods or services, and appeal to all ages and interests; whether it be

music, DVDs, electrical goods, clothes, homeware, leisure products or cosmetics andfragrances. And aspirational treats - whether it be a day at a beauty salon, or the chance to

buy a designer outfit - are always welcome.

Experience' rewards are a great way to engage personnel in motivational schemes. Thereis a vast selection available, for example, House of Fraser's shopping and pamperingexperience "Pure Indulgence" provides an unforgettable day out for both men and women

by combining relaxation, reinvigoration and reinvention, all in one day. This is achieved

by pampering each recipient with a facial, makeover or skincare treatment, a sumptuouslunch at Caf Zest, expert style consultation and finally vouchers to spend on a new

wardrobe.


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House of Fraser's corporate incentive range also extends to hampers and gift boxes,

which make an ideal staff reward both at Christmas and throughout the year. The 2008

range includes a host of famous and exclusive brands such as Mrs. Bridges, DuchyOriginal and Cottage Delight. A Jimmy's Farm' Christmas hamper is available

exclusively to House of Fraser, which features a mouth-watering selection of produce

fresh from Jimmy Doherty's farm.

Good motivation programmes can be simple and cost-effective to organise and run, and -done properly - can have a very positive impact on company morale and also on the

bottom line.

Employee motivation can often be the difference betweensuccess and failure.

Motivation issues can stem from a number of things including feeling undervalued and

isolated within a team. In order to improve staff motivation, you must first understandyour employees. Just listening to the concerns of your staff may in itself have a positive

impact on workplace motivation.

Whatever the size of your business, staff motivation is an issue that can be particularly

important formotivating employees within a team. Ensuring everyone feels part of yourorganisation and has a vital role to play can bring about immediate results.

Employee motivation solutions:

Rewards to encourage team motivation

Team building days Team nights out

Off-site team meetings

Recognition, nomination and award systems for team members

Corporate Rewards' staff motivation services are trusted by many big name brands and

can be tailored to suit the culture of your business and interests of your employees.

Motivating staff in the right way can bring enormous benefits to your organisation.

Employee Motivation Scheme Benefits:

Workplace motivation increases productivity

Motivated employees are likely to stay with your company

Staff motivation schemes deliver a great ROI

Team motivation days can enhance transferrable skills Reduce illness and absenteeism
http://www.corporaterewards.co.uk/team-motivation/http://www.corporaterewards.co.uk/team-motivation/http://www.corporaterewards.co.uk/employee-recognition/http://www.corporaterewards.co.uk/team-motivation/http://www.corporaterewards.co.uk/team-motivation/http://www.corporaterewards.co.uk/employee-recognition/http://www.corporaterewards.co.uk/team-motivation/


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Incentive Scheme and Reward System

Merchant (1989) comments that an important aspect in the design of an effective

management control system requires is how rewards (or penalties) are linked to results.

Armstrong (1994) has defined reward management as being about the design,

implementation, maintenance, communication and evaluation of a reward process whichhelps the organisation to improve its performance and achieve its objectives. He also

explains, that reward processes are based on reward philosophies and strategies and

contain arrangements in the shape of policies, guiding principles, practices, structures and

procedures which are devised and managed to provide types and levels of pay, benefitsand other form of reward.

However, reward is not just about money. There also non-financial rewards whichprovide intrisict or extrinsic motivation. Intrinsic motivation can be achieved by

satisfying individual needs for achievement, responsibility, variety, challenge or

influence in decision making. Extrinsic non-financial motivation can be achieved by skilldevelopment, learning and career opportunities. Money is not the only incentive that is

given by the management; people needs something else.

Torrington and Hall (1995) have explained:

Incentives can be used to stimulate the performance of the employee in order to achievethe objectives of company, while performance pay is to reward it.

Incentive pay programmes can give employees scope for autonomy in providing a

satisfactory basis on which to determine a rate and level of application to the job rather

then having it determined by others and mediated via close supervision"

Torrington and Hall (1995) also comment that the most widely used incentive scheme

have been those which reward employees according to the number of units of work theyproduce or the time taken to produce them.


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SCHEMES USED FOR MOTIVATING THE EMPLOYEES


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history of the aig

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