Types of rewards:

Extrinsic reward: Reward given to a person by the boss, the company, or some other
person. Extrinsic rewards are concrete rewards that employees receive, external to the
job, and come from an outside source, such as management. Extrinsic rewards include
things like money, promotions, and fringe benefits.

An intrinsic reward is a reward the person derives directly from performing the job
itself. An interesting project, an intriguing subject that is fun to study, a completed sale,
and the discovery of the perfect solution to a difficult problem all can give people the
feeling that they have done something well. Intrinsic rewards include things such as:
personal achievement, professional growth, sense of pleasure and accomplishment.

Intrinsic rewards are essential to the motivation underlying creativity. A challenging

problem, a chance to create something new, and work that is exciting in and of itself can
provide intrinsic motivation that inspires people to devote time and energy to the task.
So do managers who allow people some freedom to pursue the tasks that interest them
most.

Job rotation is changing from one task to another to alleviate boredom. For example, an
administrative employee might spend part of the week looking after the reception area of a
business, dealing with customers and enquiries.

Job enlargement is similar to job rotation in that people are given different tasks to do.
But whereas job rotation involves doing one task at one time and changing to a different
task at a different time, job enlargement means that the worker has multiple tasks at the
same time. For example, a salesperson who is responsible for generating only
sales is given by job enlargement and now is supposed to collect the payment
as well as deliver the order.

Job enrichment means that jobs are restructured or redesigned by adding higher levels
of responsibility. This practice includes giving people not only more tasks but higher-
level ones, such as when decisions are delegated downward and authority is
decentralized.
Herzberg’s theory describing two factors affecting people’s work motivation and
satisfaction. First is a hygiene factor which is defined as, characteristics of the
workplace, such as company policies, working conditions, pay, and supervision that can
make people dissatisfied. Second is, motivators, which is defined as factors that make a
job more motivating, such as additional job responsibilities, opportunities for personal
growth and recognition, and feelings of achievement. He states that no matter how good
the hygiene factors are they will not make people truly satisfied or motivated to do a good
job. However according to Herzberg, the key to true job satisfaction and motivation to
perform lies in the second category which is motivators

He made several very important contributions. First, Herzberg’s theory highlights the
important distinction between extrinsic rewards (from hygiene factors) and intrinsic
rewards (from motivators). Second, it reminds managers not to count solely on extrinsic
rewards to motivate workers but to focus on intrinsic rewards as well. Third, it set the
stage for later theories, such as the Hackman and Oldham model, that explain more
precisely how managers can enrich people’s jobs.

The Hackman and Oldham Model of Job Design:

well-designed jobs lead to high motivation, high-quality performance, high satisfaction,

and low absenteeism and turnover. These outcomes occur when people experience three
critical psychological states (noted in the middle column of the figure):

1. They believe they are doing something meaningful because their work is important
to other people. 2. They feel personally responsible for how the work turns out. 3.
They learn how well they perform their jobs

These psychological states occur when people are working on enriched jobs—that is, jobs
that offer the following five core job dimensions:

1. Skill variety —different job activities involving several skills and talents. When
cleaning employees in hospitals were given some freedom in how they carried out their
work, the employees themselves added skill variety to their work through extra efforts
such as engaging patients in small talk and figuring out ways they could make nurses’
jobs easier. After adding this skill variety, the employees reported being more satisfied
with their jobs.

2. Task identity —the completion of a whole, identifiable piece of work. At State Farm
Insurance, agents are independent contractors who sell and provide service for State Farm
products exclusively. They have built and invested in their own businesses. As a result,
agent retention and productivity are far better than industry norms.

3. Task significance —an important, positive impact on the lives of others. A study of
lifeguards found dramatic improvements in their performance if they were taught about
how lifeguards make a difference by preventing deaths. Lifeguards in the study who
simply were told that the job can be personally enriching showed no such improvements.
Similarly, James Perry, an expert on motivation of government employees, says these
workers generally have a strong commitment to serving the public good, including public
welfare and stewardship of public resources. 77

4. Autonomy —independence and discretion in making decisions. In a research

hospital, a department administrator told her people to do the kinds of research they
wanted as long as it was within budget (and legal!). With no other guidelines—that is,
complete autonomy—productivity increased sixfold in a year.

5. Feedback —information about job performance. Many companies post charts or

provide computerized data indicating productivity, number of rejects, and other data. The
Parasole restaurant group, which operates a variety of casual restaurants and steakhouses
in Minnesota, uses customer feedback on social media—hundreds of comments every
day—as a powerful source of motivation. Employees see that today’s customers
comment about their experiences online and that the employees’ treatment of customers
has a direct impact on what they post.

A person’s growth need strength will help determine just how effective a job
enrichment program might be. Growth need strength is the degree to which
individuals want personal and psychological development. Job enrichment would be
more successful for people with high growth need strength.

Empowerment is the process of sharing power with employees, thereby enhancing their
confidence in their ability to perform their jobs and their belief that they are influential
contributors to the organization. Unfortunately, empowerment doesn’t always live up to
its hype. One problem is that managers undermine it by sending mixed messages such as
“Do your own thing— the way we tell you.” But empowerment can be profoundly
motivating when done properly.
 Empowerment results in changes in employees’ beliefs—from feeling powerless to
believing strongly in their own personal effectiveness. Specifically, empowerment
encourages the following beliefs among employees. First, they perceive meaning in
their work: Their job fits their values. Second, they feel competent, or capable of
performing their jobs with skill. Third, they have a sense of self-determination, of
having some choice in regard to the tasks, methods, and pace of their work. Fourth, they
have an impact —that is, they have some influence over important strategic,
administrative, or operating decisions or outcomes on the job.

To foster empowerment, management must create an environment in which all the

employees feel they have real influence over performance standards and business
effectiveness within their areas of responsibility. An empowering work environment
provides people with information necessary for them to perform at their best, knowledge
about how to use the information and how to do their work, power to make decisions
that give them control over their work, and the rewards they deserve for the
contributions they make.

Such an environment reduces costs because fewer people are needed to supervise,
monitor, and coordinate. It improves quality and service because high performance is
inspired at the source—the people who do the work. It also allows quick action because
people on the spot see problems, solutions, and opportunities for innovation on which
they are empowered to act.

Equity theory proposes that when people assess how fairly they are treated, they
consider two key factors: outcomes and inputs. Outcomes, as in expectancy theory, refer
to the various things the person receives on the job: recognition, pay, benefits,
satisfaction, security, job assignments, punishments, and so forth. Inputs refer to the
contributions the person makes to the organization: effort, time, talent, performance,
extra commitment, good citizenship, and so forth. People have a general expectation that
the outcomes they receive will reflect, or be proportionate to, the inputs they provide.
People also pay attention to the outcomes and inputs others receive.
 Equity theory suggests that people compare the ratio of their own outcomes to inputs
against the outcome-to-input ratio of some comparison person. The comparison person
can be a fellow student, a co-worker, a boss, or an average industry pay scale. Stated
more succinctly, people compare

Their own Outcomes/inputs versus Others’ Outcomes/Inputs

You can restore equity by the the equity equation shown earlier indicates a person’s
options for restoring equity. People who feel inequitably treated can reduce their inputs
by giving less effort, performing at lower levels, or quitting. (“Well, if that’s the way
things work around here, there’s no way I’m going to work that hard [or stick around].”)
Or they can attempt to increase their outcomes.

Inevitably, managers make decisions that have outcomes more favorable for some than
for others. Those with favorable outcomes will be pleased; those with worse
outcomes, all else equal, will be more displeased. Managers can take actions to
reduce the dissatisfaction. The key is for people to believe that managers provide
procedural justice —using fair process in decision making and helping others know that
the process was as fair as possible. When people perceive procedural fairness, they are
more likely to support decisions and decision makers. You can increase people’s beliefs
that the process was fair by making the process open and visible; stating decision
criteria in advance rather than after the fact; making sure that the most appropriate people
—those who have valid information and are viewed as trustworthy— make the decisions;
giving people a chance to participate in the process; and providing an appeal process that
allows people to question decisions safely and receive complete answers. However, the
impact of procedural justice can differ by country and culture—for instance, the impact is
strongest among nations characterized by individualism, femininity, uncertainty
avoidance, and low power distance.

Quality of work life (QWL) programs creates a workplace that enhances employee
well-being and satisfaction. The general goal of QWL programs is to satisfy the full
range of employee needs. The term productivity, as applied by QWL programs, means
much more than each person’s quantity of work output. It also includes turnover,
absenteeism, accidents, theft, sabotage, creativity, innovation, and especially the quality
of work.
Psychological contract: A set of perceptions of what employees owe their employers
and what their employers owe them.