Pay and Motivation

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Why Motivation is Important

Motivation is important because workers want to feel valued and that they're doing their jobs well. Motivated staff are good for business... why?

  • Perform better
    • Produce more and better-quality products
  • Stay with the company for longer
    • Reduces staff turnover
    • Saves money
      • Firm spends less on recruting and training new employees
  • From within
    • Employee inspired
    • Wants to work hard and improve at their job
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Styles of Management

Authoritarian or autocratic

  • Managers make decisions alone without consulting staff. Workers must simply obey orders.
  • Can make workers feel they are not valued and demotivate them
  • Can be effective during crisis management


  • Managers make decisions themselves, but only after consultation with workers


  • Managers allow workforce some influence over decisions


  • 'Leave to do'
  • Managers allow workers to perform tasks as they see fit, offering help when needed
  • Good for independent workers, bad for staff who need support
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Advantages and Disadvantages of Styles of Manageme


  • Quick decision making
  • Effective when employing many low skilled workers


  • Workers feel their social needs are being met
  • More two-way communication so motivating


  • Useful when complex decisions are required that need specialist skills
  • Authority is delegated to workers which is motivating


  • Can be very motivating for highly skilled workers
  • Workers allowed to make own decisions
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Disadvantages of Styles of Management


  • No two-way communication so can be de-motivating
  • Creates "them and us" attitude between managers and workers


  • Still rather autocratic
  • Slows down deision making


  • Mistakes or errors can be made if workers are not skilled or experienced enough


  • Creates a lack of cohesiveness within the group as managers appear withdrawn
  • Very little guidance so workers may make mistakes and projects may go off task
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Training and Environment


  • Help staff become better at their jobs
  • Being good at your job will improve self-esteem
  • Trained to learn new skills
    • Take on new tasks
    • Prevents boredom and frustration
  • Help staff to meet personal targets to reach self-actualisation


Conditions affect quality of performance

  • Safe
  • Warm
  • Light
  • Comfortable

E.g open plan offices, music, staff rest areas.

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Maslow's Hierarchy of Needs

Maslow believed all people motivated by the same things. The three lower needs must be achieved before two higher needs can be met.

  • Physiological/physical survival
    • Food, water, rest, excretion, shelter + clothing
    • Canteen or vending machines, water fountain, breaks, toilets, basic wage
  • Safety
    • Safety of body, employment, health
    • Safety equipment, contract of employment, healthcare insurance
  • Love/belonging
    • Company of others
    • Social clubs, staff rooms, award schemes, uniforms, teams
  • Esteem
    • Feeling valued by others
    • Award schemes, promotion, praise, job enrichment, job title
  • Self-actualisation
    • Feel they are achieving 
    • Challenging responsibilities, appraisal e.g. development plans and training
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Methods of Pay


  • Time rate
    • Worker paid set sum per hour worker
    • Best when measuring output is difficult
    • Encourages to work long/set hours
    • May have incentive to work slowly
  • Piece rate
    • Paid sum for each item completed
    • When measuring output is easy e.g. factory worker
    • Encourages to work quickly
    • Quality may suffer if they work too fast


  • Fixed amount paid a month (yearly income /12)
  • Both employee and employer know exactly how much the pay will be
  • Does not link pay directly to performance
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Financial Rewards

Performance related pay (PRP)

  • Amount earned depends on how well they work
  • Commission
    • Paid to workers who sell goods or services
    • Small basic salary + more money for each item sold
    • Amount paid calculated as a percentage of the value they sell
    • Motivate to sell more
    • Can be too pushy and put off customers
  • Bonus
    • Extra lump sum added to pay usually once a year
    • Individual or group, when they reach performance targets
    • If target unrealistic, workers may not try to work towards it
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Extra Payments

  • Profit-sharing
    • Paid share of profits made by firm
    • Where individual contribution of workers cannot be measured
    • Some workers may not deserve payment
  • Overtime pay
    • TIme rate increased to persuade extra hours
    • Paid at time + 1/4 or time + 1/2
    • Costs firm more but possibly covered by extra sales

Temporary workers

  • Paid for a fixed period of weeks or months
  • Freelance workers are temporary, usually self empolyed
  • To help with a particular task
  • Flexibilty- extra staff for a short time for work needed to be done
  • Workers may not feel committed so not motivated
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Non-Financial Rewards

  • Fear
    • Threats
      • Scolding, being sacked
    • Not good in the long run
      • Intimidated, threatened workers change jobs or involve trade unions
      • Casues resentment
      • May not contribute
  • Job Rotation
    • Different jobs during a period of time
    • Prevents boredom
    • Learn to do different jobs
      • Be able to cover
    • May move from one unsatisfactory job to another
  • Job enlargement
    • More and varied tasks to do, but no more responsibility
    • Increase size of job description
    • Job more varied and interesting and more valued
    • More work can be demotivating
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More Non-Financial Rewards

  • Job enrichment
    • Greater responsibility e.g. supervising
    • More training
    • Motivated and work harder
    • May expect a pay rise too
  • Fringe benefits/perks
    • Any reward not part of a worker's main income
    • Costs less than income rewards
    • E.g. company car, gym membership, health insurance
  • Award schemes
    • e.g. 'Employee of the month' certificate
    • Hard work recognised
    • Can improve self esteem
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