Motivational theories

Motivational theories can be split up into content theories and process theories.

Content theories are focused on what motivates people. In other words, what an individual requires in order to be motivated.

This need can be either extrinsic, for example pay, or intrinsic, like recognition for good work. The schools of management covered are all content theories.

Process theories focus not on the needs of the worker but on the thought processes which influence how their behaviour.

Expectancy theory

This states that a worker will carry out an activity if they think that by doing so they’ll reach their desired outcome. If they think that they have the skills to complete the task then they’ll be highly motivated to achieve the goal.

Equity theory

This states that a worker will only be motivated if their remuneration package (which amounts to their wages plus fringe benefits) is a reflection of their efforts and is fair in relation to other workers.

Financial methods

The way a worker is paid can have a large effect on their motivation level.

– Time-rate (‘flat rate’) scheme: a worker gets a basic rate of pay per time period worked. If a worker works overtime then they could receive an overtime payment which is usually paid at ‘time and a half’.
– Piece-rate scheme: pay is proportional to productivity as a worker is paid per unit produced. A danger of this scheme is that a worker might be tempted to cut back on quality in order to produce more units faster.
– Commission: the employee gets a percentage of the value of the goods they manage to sell. This is a popular method in the sales industry.
– Performance-related pay (PPR): if an employee reaches certain targets then they receive a pay rise. This is popular with managerial and professional positions.
– Profit sharing: as the business becomes more profitable so the employees get a share of this profit. The main aim of this method is to motivate employees and increase their productivity as they can benefit directly from the business being successful.
– Share ownership: used a lot in PLCs, employees receive part of their pay as shares (share options). These shares tend to be given at a discounted price. For employees it’s a profitable savings-plan and after a certain amount of time they have the option to sell them. As the company becomes more profitable so their shares will rise in value, thereby motivating them to work harder and increase their productivity.

As well as pay, most businesses also provide fringe benefits including:

• – private health schemes
• – pension schemes
• – subsidised meals
• – holiday and travel discounts
• – cheap mortgages and loans
• – company cars
• – discounts on company products

An employee’s total pay plus any fringe benefits is termed their remuneration package.