Business Studies (0450) | Motivating employees

🚀 Motivating Employees: The Secret Ingredient for Business Success!

Welcome to the chapter on Motivating Employees! This is a core topic in the "People in Business" section because, simply put, a business is only as good as the people who work for it.

In this chapter, we will learn:

• Why motivation is crucial for a business.
• The famous theories that explain *why* people work.
• The practical financial and non-financial ways businesses motivate their staff.

If you've ever tried to convince a friend to help you with a tough task, you already understand motivation! Let's dive in.

💡 What is Employee Motivation?

Motivation is the willingness of employees to complete a task efficiently and effectively. It describes the factors that encourage people to put effort into work and achieve business goals.

Think of motivation as the fuel that makes the business engine run smoothly.

Why is High Motivation Important? (The Benefits!)

Highly motivated employees bring fantastic benefits to any enterprise:

• Higher Productivity: They work faster and more efficiently, leading to higher output.
• Better Quality: They take more pride in their work, reducing errors and improving product/service quality.
• Lower Absenteeism: They actually want to come to work, so fewer days are lost to sickness or skipping work.
• Lower Staff Turnover: They are happy in their job and less likely to leave, which saves the business money on hiring and training new staff. (Staff Turnover means the rate at which employees leave a business).
• Better Customer Service: Happy employees lead to happy customers!

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2. Understanding Motivation: Key Theories

Don't worry if these sound complicated—they are just ways of explaining human needs. Business managers use these theories to understand what drives their employees.

1. Maslow's Hierarchy of Needs

Abraham Maslow suggested that human needs are arranged in a specific order, often shown as a pyramid. We must satisfy the basic needs at the bottom before we are motivated by the needs higher up.

Analogy: You can't worry about getting a gold medal if you're freezing and hungry!

The Five Levels (from Bottom to Top):

1. Physiological Needs (Basic Survival):

   These are the absolute basic needs for survival, like food, water, warmth, and shelter. In a business context, this is met by providing a wage or salary high enough to live on and basic working conditions.

2. Safety Needs (Security):

   The need to feel safe and secure, both physically and financially. In business, this means job security (not being fired easily) and safe working conditions (e.g., following health and safety laws).

3. Social Needs (Belonging):

   The need for friendship, love, and belonging. Businesses can meet this through team working, social events, and good communication between staff.

4. Esteem Needs (Self-Respect):

   The need to feel valued and respected by others and yourself. Businesses can provide recognition, job titles (like 'Senior Manager'), and opportunities for promotion.

5. Self-Actualisation (Reaching Potential):

   This is the highest level—the need to fulfill your potential and achieve everything you are capable of. Businesses help meet this by offering challenging, interesting work, responsibility, and training.

2. Herzberg's Two-Factor Theory

Frederick Herzberg believed that motivation doesn't just exist on one scale (motivated vs. unmotivated). Instead, he split factors affecting work into two categories:

Factor 1: Hygiene Factors (The Dissatisfiers)

These factors do not motivate people, but if they are missing or poor, they cause dissatisfaction (unhappiness). Employees expect these to be good.

• Examples: Salary (the base pay), working conditions, company policy/rules, relationships with co-workers.

If your desk is clean (good hygiene), you don't suddenly feel motivated to work overtime. But if your desk is filthy (poor hygiene), you will definitely be unhappy!

Factor 2: Motivators (The Satisfiers)

These factors genuinely lead to job satisfaction and motivate people to work harder and perform better.

• Examples: Achievement (completing a difficult task), Recognition (being praised), Responsibility, Advancement (promotion), and the work itself being interesting.

Herzberg's Key Takeaway: To truly motivate staff, managers must focus on the Motivators (making the job itself more interesting and rewarding), not just the Hygiene Factors (like raising the basic salary).

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3. Methods of Financial Motivation

Financial methods involve paying employees extra money, often based on performance, to encourage them to work harder.

1. Wages

   Pay calculated, typically, on an hourly basis. Common for manual workers or those working flexible hours.

   • Piece Rate: A special type of wage where pay is based on the number of units produced. Example: Paying a factory worker $5 for every shirt they successfully sew.
     (Advantage: Encourages high quantity. Disadvantage: May lead to rushing and poor quality.)
2. Salaries

   Pay calculated as a fixed annual amount, usually paid in 12 equal monthly installments. Common for managers or office staff.

3. Commission

   A payment made to sales staff, calculated as a percentage of the value of the goods or services they sell. Example: A car salesperson earns 10% commission on the price of every car sold.
   (Advantage: Highly motivates sales staff. Disadvantage: Can lead to aggressive sales techniques.)

4. Profit Sharing

   Employees receive a percentage of the company's annual profits. This links employee effort directly to the firm's success.

5. Performance-Related Pay (PRP) / Bonus

   A lump sum bonus paid to employees who meet or exceed specific, pre-agreed targets. Example: If the team reduces waste by 5% this quarter, they all get a $500 bonus.

6. Share Ownership

   Giving employees shares in the company. This makes them part-owners, encouraging them to work harder so the company (and their shares) increases in value.

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4. Methods of Non-Financial Motivation

Non-financial methods focus on improving the job itself and the working environment to make employees feel more valued, responsible, and fulfilled (linking back to Herzberg's Motivators).

1. Job Enrichment

   Giving employees more challenging and complex tasks and greater autonomy (freedom) to decide how to complete them. It provides more responsibility, moving towards Maslow's Esteem and Self-Actualisation needs.

   Example: A junior designer is given the full responsibility for creating a small part of a client's website, rather than just colouring in images.
2. Job Rotation

   Allowing employees to switch between different tasks or departments for a period of time. This reduces boredom and helps employees understand how the whole business works.

   Example: A bank teller spends a month working on loans, then a month working on customer service desk.
3. Job Enlargement

   Giving employees *more tasks* but often of a similar level of complexity. This adds variety and can reduce boredom, but it might not increase motivation if the tasks are still very simple. (It's sometimes called 'horizontal loading').

4. Team Working

   Organising employees into groups (teams) to achieve a common goal. This meets Maslow's Social Needs, encourages communication, and allows for shared responsibility and problem-solving.

5. Training

   Providing opportunities for staff to learn new skills. This increases competence, raises confidence (Esteem Need), and often leads to opportunities for promotion (Self-Actualisation).

6. Delegation

   Passing down authority from a manager to a subordinate to make decisions and carry out tasks. This gives the subordinate a feeling of trust and responsibility (Motivator and Esteem Need).