9.10 Key Takeaways & Terms

Key Takeaways

  • Companies use a wide variety of incentives to reward performance. This is consistent with motivation theories showing that rewarded behaviour is repeated.
  • Piece rate, individual bonuses, merit pay, and sales commissions tie pay to individual performance.
  • Team bonuses are at the department level, whereas gainsharing, profit sharing, and stock options tie pay to company performance.
  • While these systems may be effective, people tend to demonstrate behaviour that is being rewarded and may neglect other elements of their performance. Therefore, reward systems should be designed carefully and should be tied to a company’s strategic objectives.
  • Motivation describes a generated drive that propels people to achieve goals or pursue particular courses of action.
  • Goal-setting theory is one of the most influential theories of motivation. In order to motivate employees, goals should be SMART (specific, measurable, aggressive, realistic, and time-bound).
  • SMART goals motivate employees because they energize behaviour, give it direction, provide a challenge, force employees to think outside the box, and devise new and novel methods of performing.
  • Goals are more effective in motivating employees when employees receive feedback on their accomplishments, have the ability to perform, and are committed to goals.
  • Poorly derived goals have the downsides of hampering learning, preventing adaptability, causing a single-minded pursuit of goals at the exclusion of other activities, and encouraging unethical behaviour. Companies tie individual goals to company goals using management by objectives.

Key Terms

Autocratic leaders set policies and make decisions primarily on their own, taking advantage of the power present in their title or status to set the agenda for the group.

Awards: symbolic methods of recognition to the degree these methods convey sincere appreciation for employee contributions

Bonuses are one-time rewards that follow specific accomplishments of employees

Democratic leaders facilitate group discussion and like to take input from all members before making a decision.

Formal leaders: leaders who hold a position of authority and may use the power that comes from their position, as well as their personal power, to influence others

Gainsharing is a company-wide program in which employees are rewarded for performance gains compared to past performance

Goals are outcome statements that define what an organization is trying to accomplish, both programmatically and organizationally

Goal commitment refers to the degree to which a person is dedicated to reaching the goal.

Incentives are reward systems that tie pay to performance

Informal leaders: leaders that are without a formal position of authority within the organization but demonstrate leadership by influencing others through personal forms of power

Laissez-faire leaders take a “hands-off” approach, preferring to give group members freedom to reach and implement their own decisions.

Leaders: people who take charge of or guide the activities of others

Leader-as-coach combines many of the talents and skills we’ve discussed here, serving as a teacher, motivator, and keeper of the goals of the group

Leader-as-conductor involves a central role of bringing people together for a common goal

Leader-as-technician: a role that often occurs when one employee has skills that others do not

Leadership is a complex of beliefs, communication patterns, and behaviours that influence the functioning of a group and move a group toward the completion of its task

Measures are the actual metrics used to gauge performance on objectives

Merit pay involves giving employees a permanent pay raise based on past performance

Motivation refers to an internally generated drive to achieve a goal or follow a particular course of action

Objectives are very precise, time-based, measurable actions that support the completion of a goal

Piece rate incentives: employees are paid on the basis of individual output they produce

Profit sharing programs involve sharing a percentage of company profits with all employees

Reward management system: practice used by organizations to achieve their objectives which includes intrinsic rewards and extrinsic rewards like salary, bonuses, recognition, praise, flexible working hours, and social rights

Sales commissions involve rewarding sales employees with a percentage of sales volume or profits generated

SMART goal is a goal that is specific, measurable, aggressive, realistic, and time-bound

Stock option: gives an employee the right, but not the obligation, to purchase company stocks at a predetermined price.

Team bonuses: tying employee pay to team performance in situations in which employees should cooperate with each other and isolating employee performance is more difficult



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