Methods of Remuneration / Motivation

Motivation: the causes of people's actions - why people behave as they do. 

Financial Methods of Motivation

Money as a motivator can lead to problems for both individuals and organisations:

• Rewards fluctuate with the performance of the company and this can cause uncertainty in financial planning if employees come to depend upon rewards.
• If financial incentives are high and based on quantity, quality may be sacrificed, with serious long-term consequences for organisations.
• If rewards are based on individual performance, it can cause conflict between employees.

The range of financial methods used to motivate employees includes:

• Time Rates - Used when employees are paid for the amount of time they spend at work. It is a simple method for both the employee and business, and also means the business can plan ahead, however can reduce productivity as staff are paid regardless
• Piece Rates - Gives a payment for each item produced - it is therefore the easiest way for a business to ensure that employees are paid for the amount of work they do. Piece-rate pay encourages effort, but, it is argued, often at the expense of quality
• Performance Related Pay - Performance-related pay is a financial reward to employees whose work is considered to have reached a required standard, and/or is above average. Performance related pay is generally used where employee performance cannot be appropriately measured in terms of output produced or sales achieved.
• Profit-Sharing  - Where profit is shared out between employees, meaning it is in everybody's interest to be productive
• Share Ownership and Share Options schemes - Offering shares is a more complicated kind of reward than paying employees cash. However, it can be much more effective in linking the objectives of the business (e.g. profit maximisation) and the objectives of employees (e.g. make a large gain on the value of shares held).
• Fringe Benefits - Non-taxable incentives given to employees and commonly include health insurance, group term life coverage, education reimbursement, childcare and assistance reimbursement, cafeteria plans, employee discounts, personal use of a company owned vehicle and other similar benefits.

Non-Financial Methods of Motivation:

Job Enlargement

Increasing the scope of a job, either by job enrichment or by job rotation.

• Job Enrichment: jobs are expanded vertically (known as vertical extension) by giving the worker more responsibility
• Job Rotation: jobs are expanded horizontally (known as horizontal extension) by giving the worker more tasks, but at the same level of responsibility.

Empowerment

Giving employees the means by which they can exercise power over their working lives.

Empowerment can be achieved through informal systems or through the more formal system of autonomous work groups. It involves:

• recognizing that workers are capable of doing more
• making workers feel trusted and confident to carry out jobs and make decisions without supervision
• recognizing workers' achievements
• creating an environment where workers wish to contribute and to be involved