CHAPTER 6: APPLIED PERFORMANCE PRACTICE
The Meaning of Money in the Workplace: money and other financial rewards represent a form of
exchange; employees provide their labor, skill, and knowledge in return for money and benefits from
the organization. From this perspective, money and related rewards align employee goals with
organizational goals. Money is much more than compensation. It is a need. It’s a sense of status,
achievement, motivation. It has important consequences on our behaviors. According to one source,
“Money is probably the most emotionally meaningful object in contemporary life.” Money varies
from person to person. People can describe it as something negative (source of evil or anxiety) or
they can describe it something prestigious. The meaning of money differs between men and women.
Men consider it as a source of power and status while women consider it as a source of generosity
and caring by giving things to others. Money is a great motivator. People with higher salaries have a
better job performance. Overall, current organizational behaviour knowledge indicates that money is
much more than a means of exchange between employer and employee. It fulfills a variety of needs,
influences emotions, and shapes or represents a person’s self-concept.
Financial Reward Practices: Financial rewards come in many forms which can be categorized in 4
forms.
1. MEMBERSHIP- AND SENIORITY-BASED REWARDS: Membership-based and seniority-based
rewards are sometimes called “pay for pulse”. Some employee benefits are provided equally
to everyone, such as the end-of-year $1,000 shopping bonus, free meals, and twicemonthly
housekeeping services that Shopify employees receive. Other rewards increase with
seniority. For example, employees with 10 or more years of service at the Paul Scherrer
Institute near Zurich, Switzerland, receive an annual loyalty bonus equal to a half month’s
salary. These membership- and seniority-based rewards potentially reduce turnover and
attract job applicants. they do not directly motivate job performance; on the contrary, they
discourage poor performers from seeking work better suited to their abilities.
2. JOB STATUS–BASED REWARDS: t every organization rewards employees to some extent on
the basis of the status or worth of the jobs they occupy. Job worth is measured by job
evaluation (the amount of effort and skills required for the job). The higher the worth
assigned to a job, the higher the minimum and maximum pay for people in that job.
Employees with higher job worth also get perks( cars and etc). It creates a sense of fairness
that people with higher job value get higher pay. However, at a time when companies are
trying to be more cost-efficient and responsive to the external environment, job status–
based rewards potentially do the opposite by encouraging a bureaucratic hierarchy. Job
status based rewards also make the people to exaggerate their job duties.
3. COMPETENCY-BASED REWARDS: , many companies have shifted reward priorities from job
status to skills, knowledge, and other competencies that lead to superior performance. The
most common practices identify a list of competencies relevant across all job groups, as well
as competencies specific to each broad job group. The employees are paid according the skill
set that demonstrates their job. Skill-based pay plans are a more specific variation of
competency-based rewards in which people receive higher pay determined by their mastery
of measurable skills. Companies are now paying on how good their employees are at certain
skills. ent pay bracket,” explains a High Liner executive. Competency-based rewards
motivate employees to learn new skills.18 This tends to support a more flexible workforce,
increase employee creativity, and allow employees to be more adaptive to embracing new
practices. However, They are often overdesigned, making it difficult to communicate these
plans to employees. Skill-based pay systems measure specific skills, so they are usually more
objective.
4. PERFORMANCE-BASED REWARDS: Here is an overview of some of the most popular
individual, team, and organizational performance-based rewards.
Individual Rewards: Many employees receive individual bonuses or other rewards for
accomplishing a specific task or exceeding annual performance goals. An example could be
commission-based pay. (har room saaf kerne pe itnay paisay)
Team Rewards: Organizations have shifted their focus from individuals to teams, and
accompanying this transition has been the introduction of more team-based rewards. Nucor
Inc. relies heavily on team-based rewards. The steelmaker’s employees earn bonuses that
can exceed half their total pay but there are some penalties too. Another form of team-
based performance reward, called a gainsharing plan, calculates bonuses from the work
unit’s cost savings and productivity improvement. These cost reductions mainly occur
through negotiating better prices of materials. Gainsharing plans tend to improve team
dynamics, knowledge sharing, and pay satisfaction.
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Organizational Rewards: Along with individual and team-based rewards, many firms motivate
employees with organizational-level rewards. They do so by doing 3 things 1) Employee stock
ownership plans (ESOPs) 2) stock options 3) profit-sharing plan
Employee stock ownership plans (ESOPs) are organizational rewards that encourage employees to
buy company stock, usually at a discounted price. The financial incentive occurs in the form of
dividends and market appreciation of the stock.
stock options a reward system that gives employees the right to purchase company stock at a future
date at a predetermined price for eg buying a stock for rs 50 over 6 years and the stock price
increases to 60 in two years. So the employee is earning rs10.
profit-sharing plan a reward system that pays bonuses to employees on the basis of the previous
year’s level of corporate profits.
Evaluating Organizational-Level Rewards: ESOPs and stock options create a sense of ownership
within the employees and it also produces some good results. But it is weak as well. Where as profit
sharing plan has its advantage that it directly compensates employees benefits with the firm’s
prosperity. One reason why organizational rewards don’t improve motivation or performance very
much is that employees perceive a weak connection between their individual effort and the
determinants of those rewards (i.e., corporate profits or stock price). Bec in economic recession or
some outside factors employees are helpless as well.
6.2 Improving Reward Effectiveness
Reward systems do motivate most employees, but only under the right conditions. Here are some of
the more important strategies for improving reward effectiveness.
LINK REWARDS TO PERFORMANCE: subjective measures of performance are necessary, companies
should rely on multiple sources of information. Companies also need to apply rewards soon after the
performance occurs, and in a large-enough dose (such as a bonus rather than a pay increase), so
employees experience positive emotions when they receive the reward.
ENSURE THAT REWARDS ARE RELEVANT: Companies need to align rewards with performance within
the employee’s control. The more employees see a “line of sight” between their daily actions and
the reward, the more they are motivated to improve performance. A lower level manager would get
reward for inventory efficiencies and an higher level manager would get bonus for overall fleet
performance. Salespeople in one region may have higher sales because the economy is stronger
there than elsewhere, so sales bonuses need to be adjusted for such economic factors.
USE TEAM REWARDS FOR INTERDEPENDENT JOBS: Team rewards are better than individual rewards
when employees work in highly interdependent jobs, because it is difficult to measure individual
performance in these situations. producing steel is a team effort, so employees earn bonuses based
on team performance. Team rewards also encourage cooperation, which is more important when
work is highly interdependent. A third benefit of team rewards is that they tend to support
employee preferences for teambased work. However, one dropback is when a high performing
employee would prefer individual awards.
ENSURE THAT REWARDS ARE VALUED: A reward should be of some value to the employee. You can
not give a box of donuts to employee as an appreciation. Sometimes the companies should think
smartly. A jacket with a logo of company is sometimes a good reward.
6.3 Job design practices
job design: the process of assigning tasks to a job, including the interdependency of those tasks with
other jobs.
Job specification: Job specialization occurs when the work required to serve a customer—or provide
any other product or service—is subdivided into separate jobs assigned to different people. For
instance, supermarkets have separate jobs for checking out customers, stocking shelves, preparing
fresh foods, and so forth.
Cycle Time: Cycle time is the time required to complete the task before starting over with another
item or client. Supermarket cashiers have a cycle time of about 4 seconds to scan each item before
they repeat the activity with the next item.
Why job specification is imp? : The simple answer is that job specialization potentially improves work
efficiency. One reason for this higher efficiency is that employees have less variety of tasks to juggle
(such as checking out customers versus stocking shelves), so there is less time lost changing over to a
different type of activity. Employees can give complete attention and can get specialized in a job.
shorter work cycles give employees more frequent practice with the task, so jobs are mastered more
quickly. specialization tends to increase work efficiency by allowing employees wit.h specific
aptitudes or skills to be matched more precisely to the jobs for which they are best suited.
Scientific Management: scientific management is mainly associated with high levels of job
specialization and standardization of tasks to achieve maximum efficiency. Even the supervisor’s
tasks should be divided: One person manages operational efficiency, another manages inspection,
and another is the disciplinarian.
PROBLEMS WITH JOB SPECIFICATIONS: job specialization adversely affects employee attitudes and
motivation. Some jobs—such as scanning grocery items—can be so specialized that they soon
become tedious, trivial, and socially isolating. Employee turnover and absenteeism tend to be higher
in specialized jobs with very short cycle times. Companies sometimes have to pay higher wages to
attract job applicants. Job specialization effects output quality but in 2 different ways. A specialist
lawyer would perform well but a supermarket cashier wont as his job is tiring.
6.4 Job Design and Work Motivation
motivator-hygiene theory: Herzberg’s theory stating that employees are primarily motivated by
growth and esteem needs, not by lowerlevel needs.
Job characteristics Model: Itidentifies five core job dimensions that produce three psychological
states. Employees who experience these psychological states tend to have higher levels of internal
work motivation (motivation from the work itself), job satisfaction (particularly satisfaction with the
work itself), and work effectiveness.
*Core Job characteristics:
1. Skill Variety: Skill variety refers to the use of different skills and talents to complete a
variety of work activities. For example, sales clerks who normally only serve customers might
be assigned the additional duties of stocking inventory and changing storefront displays.
2. Task Identity: Task identity is the degree to which a job requires completion of a whole or
identifiable piece of work, such as assembling an entire broadband modem rather than just
soldering in the circuitry.
3. Task Significance: Task significance is the degree to which the job affects the organization
and/or larger society. It is an observable characteristic of the job (you can see how it
benefits others) as well as a perceptual awareness.
4. Autonomy: Jobs with high levels of autonomy provide freedom, independence, and
discretion in scheduling the work and determining the procedures to be used to complete
the work. In autonomous jobs, employees make their own decisions rather than rely on
detailed instructions from supervisors or procedure manuals
5. Job Feedback: Job feedback is the degree to which employees can tell how well they are
doing from direct sensory information from the job itself. Airline pilots can tell how well they
land their aircraft.
Skill variety, task identity, and task significance directly contribute to the job’s experienced
meaningfulness—the belief that one’s work is worthwhile or important. Autonomy directly
contributes to feelings of experienced responsibility—a sense of being personally accountable for
the work outcomes. The third critical psychological state is knowledge of results—an awareness of
the work outcomes based on information from the job itself.
INDIVIDUAL DIFFERENCES: Job design doesn’t increase work motivation for everyone in every
situation. Employees must have the required skills and knowledge to master the more challenging
work. Otherwise, job design tends to increase stress and reduce job performance. Growth need
strength refers to an individual’s need for personal growth and development, such as work that
offers challenges, cognitive stimulation, learning, and independent thought and action.
SOCIAL AND INFORMATION PROCESSING JOB CHARACTERISTICS: The job characteristics
model overlooks two clusters of job features: social characteristics and information processing
demands.67 One social characteristic is the extent to which the job requires employees to interact
with other people (coworkers, clients, government representatives, etc.). This social interaction is
associated with task interdependence which is the extent to which employees need to share
materials, information, or expertise with each other. 2nd social interaction is feedback, as it
motivates. The other cluster is information pressing demands of the job. One information processing
demand is how predictable the job duties are from one day to the next (called task variability). The
second information processing demand, called task analyzability, refers to how much the job can be
performed using known procedures and rules. Jobs with high task analyzability have a ready-made
“cookbook” to guide job incumbents through most decisions and actions.
Job Design Practices That Motivate: : job rotation, job enlargement, and job enrichment.
Job Rotation: There are three potential benefits of job rotation. First, it increases skill variety
throughout the workday, which seems to improve employee motivation and satisfaction to some
extent. A second benefit of job rotation is that it minimizes health risks from repetitive strain and
heavy lifting because employees use different muscles and physical positions in the various jobs. A
third benefit is that job rotation supports multiskilling (employees learn several jobs), which
increases workforce flexibility in staffing the production process and in finding replacements for
employees on vacation.
Job enlargement: Job enlargement adds tasks to an existing job. This might involve combining two or
more complete jobs into one or just adding one or two more tasks to an existing job. Either way, skill
variety increases because there are more tasks to perform. A video journalist is an example of an
enlarged job. As Exhibit 6.3 illustrates, a traditional news team consists of a camera operator, a
sound and lighting specialist, and the journalist who writes and presents or narrates the story. One
video journalist performs all of these tasks. However, research suggests that simply giving
employees more tasks won’t affect motivation, performance, or job satisfaction until employees are
motivated when they perform a variety of tasks and have the freedom and knowledge to structure
their work to achieve the highest satisfaction and performance.
Job enrichment: Job enrichment occurs when employees are given more responsibility for
scheduling, coordinating, and planning their own work. For eg an employee entertaining a client in
his own way. es. People who perform enriched jobs potentially have higher job satisfaction and work
motivation, along with lower absenteeism and turnover. Productivity is also higher when task
identity and job feedback are improved. One way to increase job enrichment is by combining highly
interdependent tasks into one job. This natural grouping approach is reflected in the video journalist
job because it naturally groups task together to complete an entire product. A second job
enrichment strategy, called establishing client relationships, involves putting employees in direct
contact with their clients rather than using another job group or the supervisor as the liaison
between the employee and the customer. Establishing client relationships increases task significance
because employees see a line-of-sight connection between their work and consequences for
customers. By being directly responsible for specific clients, employees also have more information
and can make better decisions affecting those clients. Forming natural task groups and establishing
client relationships are common ways to enrich jobs.
6.5 Empowerment practices
the most widely accepted definition is that empowerment is a psychological experience represented
by four dimensions: self-determination, meaning, competence, and the impact of the individual’s
role in the organization.
Self-determination. Empowered employees feel that they have freedom, independence, and
discretion over their work activities.
• Meaning. Employees who feel empowered care about their work and believe that what they do is
important.
• Competence. Empowered people are confident about their ability to perform the work well and
have a capacity to grow with new challenges.
• Impact. Empowered employees view themselves as active participants in the organization; that is,
their decisions and actions have an influence on the company’s success.
6.6 Leadership Practices
Self-leadership refers to specific cognitive and behavioral strategies to achieve personal goals and
standards. These activities support the individual’s self-motivation and self-direction without direct
assistance from managers or others
SELF-LEADERSHIP STRATEGIES: strategies, designing natural rewards, self-monitoring, and self-
reinforcement.
Personal Goal Setting: Self-leadership refers to leading oneself toward objectives, so the process
necessarily begins by setting goals. These goals are self-determined, rather than assigned by or
jointly decided with a supervisor. Research suggests that employees are more motivated and
perform better when they set their own goals, particularly in combination with other self-leadership
practices.
Constructive Thought Strategies: Before beginning a task and while performing it, employees engage
in two constructive (positive) thought strategies about that work and its accomplishment: positive
self-talk and mental imagery.
Self-talk refers to any situation in which we talk to ourselves about our own thoughts or actions. The
problem is that most self-talk is negative; we criticize much more than encourage or congratulate
ourselves. Negative self-talk undermines our confidence and potential to perform a particular task.
In contrast, positive self-talk creates a “can-do” belief and thereby increases motivation by raising
our self-efficacy and reducing anxiety about challenging tasks.
mental imagery, has two parts. One part involves mentally practicing the task, anticipating obstacles
to goal accomplishment, and working out solutions to those obstacles before they occur. By
mentally walking through the activities required to accomplish the task, we begin to see problems
that may occur. We can then imagine what responses would be best for each contingency
Designing Natural Rewards: One way to build natural rewards into the job is to alter the way a task is
accomplished. People often have enough discretion in their jobs to make slight changes to suit their
needs and preferences.
Self-Monitoring: Self-monitoring is the process of keeping track at regular intervals of one’s progress
toward a goal by using naturally occurring feedback. Self-monitoring significantly improves
employee performance.94 However, some self-monitoring arrangements may be better than others.
But many of us are unable to observe our work output so quickly or easily. Instead, feedback
mechanisms need to be designed. Salespeople might arrange to receive monthly reports on sales
levels in their territory.
Self-reinforcement: occurs whenever an employee has control over a reinforcer but doesn’t “take”
the reinforcer until completing a self-set goal. A common example is taking a break after reaching a
predetermined stage of your work. The work break is a self-induced form of positive reinforcement.
Self-reinforcement also occurs when you decide to do a more enjoyable task after completing work
that you dislike. For example, after slogging through a difficult report, you might decide to spend
time doing a more pleasant task, such as catching up on industry news by scanning websites.
EFFECTIVENESS OF SELF-LEADERSHIP: A respectable body of research shows consistent support for
most elements of selfleadership. Austrian army soldiers who completed a self-leadership training
course performed better on physical tests (such as time completing an obstacle course) and
educational tests on subjects they were studying at the time, compared to soldiers who didn’t take
the course. Studies also indicate that constructive thought processes improve individual
performance in various sports activities.
PERSONAL AND SITUATIONAL PREDICTORS OF SELF-LEADERSHIP: self-leadership behaviors are more
frequently found in people with higher levels of conscientiousness and extroversion. People with a
positive selfconcept evaluation (i.e., self-esteem, self-efficacy, and internal locus of control) are also
more likely to apply self-leadership strategies. The work environment influences the extent to which
employees engage in self-leadership. Specifically, employees require some degree of autonomy to
engage in most aspects of self-leadership. They also feel more confident with self-leadership when
their boss is empowering rather than controlling and if there is a high degree of trust between them.
