Motivation and Incentive Plans

Motivation derives from ability to achieve the target and desire for the reward. Motivation employees have always been a major concern of managers, and it's easy to see why. Managers get things done through others, and if you can't motivate your employees to get their jobs done, you are destined to fail as a manager. By understanding the factors influencing motivation, managers can create the conditions in which employees will perform to their maximum potential.

One of the best known theories of motivation was put forward by an American psychologist, Abraham Maslow, in a book entitled "Motivation and Personality (1954)". In his theory, he presents a hierarchy of needs. He identified certain basic human needs and classified them in an ascending order of importance, basic needs were at the bottom of the hierarchy, higher needs at the top.

Maslow says that first of all an individual's physiological needs must be satisfied. These include the need for air, water, food and sex. At second stage an individual's safety needs must be satisfied. This means that the individual must feel safe and free from fear and threat. After that come the belongingness needs – the need for love, affection, feelings of belonging and, finally, human contact. Having fulfilled their belongingness needs, individuals next need to satisfy their esteem needs. These include the following four needs: firstly self-respect, secondly self-esteem, thirdly achievement and finally respect from others. The final step is to satisfy the self-actualisation needs – those needs which enable individuals to grow, to feel fulfilled and realise their potential. But before moving on to these higher level needs, the lower level needs must first be satisfied. An organisation must, therefore, firstly pay a wage sufficient to feed, shelter and protect employees and their families; in addition it must also provide a safe working environment before offering the employees incentives for developing self-esteem, belongingness and self-actualisation.

There is a reward scheme that attempts to tie pay directly to job performance which is called an incentive plan. Incentive plans can motivate employees. For motivation to take place, the worker must believe that effort on his or her part will lead to reward, and he or she must want that reward. Here are some specific guidelines for developing effective incentive plans:

1. Ensure that effort and rewards are directly related.

The motivation model shows that for an incentive to motivate employees, they must see that effort will lead to their obtaining the reward. Your incentive plan should be therefore reward employees in direct proportion to their increased productivity. Employees must also perceive they can actually do the tasks required. Thus, the standard has to be attainable, and you have to provide the necessary tools, equipment and training.

2. The reward must be valuable to the employees.

For an incentive to motivate an employee, it is necessary to provide an attractive reward. Since people’s needs differ, the attraction of various incentives also differs. Where other needs – for achievement, recognition, etc. – are paramount, financial incentives may have little or no effect on performance.

3. Study methods and procedures carefully.

Effective incentive plans are generally based on a meticulous work methods investigation. This usually requires the services of an industrial engineer or other methods expert. Through very careful observation and measurement they define fair performance standards. Your incentive plan is then built on these standards.

4. The plan must be understandable.

Employees should be able to easily work out the rewards they will receive for various levels of effort (remember it is very important for them to see effort-reward link.

5. Set effective standards.

The standards on which your incentive plan is built should satisfy the following requirements: they should be viewed as fair by your subordinates; they ought to be set high, but reasonable – there should be about a 50-50 chance of success at reaching them; and the goal should be specific – this is much more effective than telling someone to “do your best”.

6. Guarantee your standards.

Around the turn of the century employers often raised production standards whenever employees’ pay became excessive. Today, employees remain suspicious that exceeding the standard will result in raising the standards, and to protect their own long-term interests they don’t produce above standard, and the incentive plan fails. Therefore, it is important that you view the standard as a contract with your employees. Once the plan is operational, you should use great caution before decreasing the size of the incentive in any way.

7. Guarantee an hourly base rate.

Particularly for plant personnel, it is usually advisable to guarantee this rate for employees. They will therefore know that no matter what happens they can at least earn a minimum guaranteed rate.