How to motivate employee at atlas copco vietnam company

HOW TO MOTIVATE EMPLOYEES AT ATLAS COPCO VIETNAM COMPANY In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In Marketing by Ms.. 36 Figure

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

HOW TO MOTIVATE EMPLOYEES

AT ATLAS COPCO VIETNAM COMPANY

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

In Marketing

by

Ms TRAN THI QUY LOC ID: MBA03018 International University - Vietnam National University HCMC

Plagiarism Statements

I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Hochiminh City

Copyright Statement

This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognize that its copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the author’s prior consent

© Tran Thi Quy Loc/ ID.MBA03018/2010-2012

Table of Contents

CHAPTER I: INTRODUCTION .1

I.1 Introduction .1

I.2 Statement of problem 1

I.2.1 The Atlas Copco’s background 1

I.2.2 The problem at Atlas Copco Vietnam .4

I.3 Research objectives 5

I.4 Rationale for the study 5

I.5 Scope and limitation of the study 6

I.6 Research structure 6

CHAPTER II: LITURATURE REVIEW 8

II.1 The concepts of motivation 8

II.1.1 Motivation 8

II.1.2 The work motivation 10

II.2 The Motivation Theory 13

II.2.1 Content theories 14

II.2.2 Process theories 19

II.3 The effects of motivation on employees .23

II.4 The motivation factors .26

II.4.1 The monetary factors 29

II.4.2 The non-monetary factors 31

II.5 Research model 36

CHAPTER III: RESEARCH METHODOLOGY 37

III.1 Research approach .37

III.2 Research strategy 37

III.3 Process of procedure .38

III.4 Data collection .39

III.4.1 Sample size .40

III.4.2 The tools of data collection 41

III.5 Data analysis .43

III.6 Validity and reliability .45

III.7 Research process 46

CHAPTER IV: DATA ANALYSES AND FINDING .49

IV.1 The Finding 49

IV.2 RQ1: Which factors impact to motivation? 51

IV.3 RQ2: What do factors affect to motivation like? 56

IV.4 RQ3: How to have effective motivation at company? 61

CHAPTER V: CONCLUSION AND RECOMMENDATION 65

V.1 Conclusion 65

V.2 Recommendation 67

V.2.1 Recommendation for organization 67

V.2.2 Recommendation for future research 68

REFERENCE 69

APPENDIX A: Interview Guide - Question Guide for Employees 74

APPENDIX B: Interview Guide - Questions Guide for Leaders 75

LIST OF FIGURES AND TABLE Figure 1: Atlas Copco Organization Chart 3

Figure 2: Maslow’s hierarchy of needs 14

Figure 3: Herzberg’s theory – factors affecting job attitudes 18

Figure 4: Adam’s Equity Theory – job motivation 21

Figure 5: The Research Model of Motivation Employees at Atlas Coco Vietnam 36

Figure 6: The Research Process Model 48

Figure 7: The New Model of Motivation Employees at Atlas Copco Vietnam 49

A qualitative, case study methodology was used to interview two groups: subordinate group and leader group, at Atlas Copco Vietnam Company The findings showed that motivation is very important and managers have to have a hard task motivating their employees

The knowledge from the theoretical part of this paper combine with results of the research can be useful for managers who have interaction directly to their employees become more perfect

Key words: Employee motivation, Motivation factors

CHAPTER I: INTRODUCTION

I.1 Introduction

Business all over the world today is very challenging Internal and external operating environment factors continue to challenge corporate performance and revenue growth To stay profitable in the highly challenging and competitive global market economy, all the factor of production - men, machine and materials – should be wisely managed Among the factors of production the human resource constitutes the biggest challenge because it require about skills of thoughts, feelings and emotions to secure highest productivity Employee motivation delivers long-term benefits in the form of high productivity A motivated employee is a valuable asset, which delivers immense value to the organization in maintaining and strengthening its business and revenue growth

Employee motivation is a major factor in the success or failure for any organization Therefore, competitive organizations must invest in effective strategies to motivate the staff Different factors motivate individuals and teams differently Some people are motivated by money, others by the opportunity for professional development, flexible schedules, or a sense of accomplishment So, from line managers to top executives, understanding what factors motivate their employees is key to gaining the human resource advantage that leads success in challenging marketplace

Motivated employees are willing to devote time to certain level of commitment for a particular objective in an organization The motivation process is significant enough

to affect the levels of trust and commitment necessary of employees, who will perform well the work requirements of organization

I.2 Statement of Problem

I.2.1 The Atlas Copco’s background:

Atlas Copco is an industrial group with world-leading positions in compressors, expanders and air treatment systems, construction and mining equipment, power tools and assembly systems With innovative products and services, Atlas Copco delivers solutions for sustainable productivity The company was founded in 1873, is based in

Stockholm, Sweden, and has a global reach spanning more than 170 countries In 2011, Atlas Copco had 37500 employees

Atlas Copco has been operating in Vietnam from 1994 through some distribution companies But, to 2004, Atlas Copco Vietnam has founded with 100% wholly ownership by Atlas Copco Group Atlas Copco Vietnam’s operation, all have to base on principles of the Group, as follow:

* Vision

The vision of the Group is to be “First in Mind – First in Choice” of its customers, business partners, stakeholders, as well as employees The vision is also the driving force of the corporate responsibility strategy in order to achieve sustainable results

* Organization

The Atlas Copco is organized in separate, focused but still integrated business areas, each operating through divisions The role of the business area is to develop, implement, and follow up the objectives and strategy within its business The divisions are separate operational units, each responsible to deliver growth and profit in line with strategies and objectives set by the business area The divisions generally conduct business through customer centers, distribution centers, and

Common service providers – internal or external – have been established with the

mission to provide services faster, to a higher quality, and at a lower cost, thus allowing the divisions to focus on their core businesses

Figure 1: Atlas Copco Organization Chart

* Relationships

- Society and the environment: being a good and reliable corporate citizen, observing the spirit as well as the letter of the laws of the countries in which we operate

- Employees: being the preferred employer of both current and potential employees Our aim is to attract, develop, and keep qualified and motivated people in

a professional environment

- Customers: being the preferred supplier to current and potential customers and end-users, which means that we should achieve the highest possible customer and

- Business partners: being the best associate for our business partners, such as suppliers, subcontractors, joint venture partners and agents, and to be the one that they prioritize

- Shareholders: being the preferred company for shareholders to invest in, and we aim to create, and continually increase, shareholder value

I.2.2 The problem at Atlas Copco Vietnam

The Atlas Copco is known with many good policies and practices to develop long-term not only for customers, shareholders and partners, but also for their employees However, in the recent period at Atlas Copco Vietnam, unfortunately, the phenomenon of brain drain and employee replacement frequency have been occurred and created many troubles for operation of Atlas Copco Vietnam’s business and management and leadership at there also

Many employees were replaced continuously in the short time, especially in 2010 until now Almost of them have leaved the Atlas Copco Vietnam, then they become new competitors or work for competitors of Atlas Copco on the market soon Staying employees almost felt unhappy and didn’t trust their leaders This perspective is very serious and are forecasted is the unsustainable leadership

The fact of connecting between employees with Atlas Copco Vietnam is not enough durable Because employees feel that they have not had motivation from leaders, that reason why the senior employees have gone away and found out new opportunities and some of remaining others have became lack of dynamism, creativity and innovation; cumbersome and indifferent attitude or lack of responsibility, etc lead to stagnation mode

of operation

There are many phenomena of lack of active labor and the departure of employees Firstly, remuneration, salary is not adequate for the work and effort of employees Secondly, assessment of work capacity is not specific, relevant and no opportunity for advancement Notably, the decline in prestige of leadership, management, the weak management capacity, the decline of morality is also a cause affect positive labor of

Happy employees are loyal employees Happy employees are devoted employees However, the creation of "happiness" for employees is still problematic for many companies and leaders According to me, this is the problem of managing people, and the

key for case is how to motivate employees at Atlas Copco Vietnam?

I.3 Research Objectives

The main objectives of this study are:

- Identifying the factors impact to employee motivation

- Proposing recommendations about the ways to motivate employees at Atlas Copco Vietnam Company

From research objective, we have three research questions as follow:

- RQ1: Which factors impact to motivation?

- RQ2: What do factors affect to motivation like?

- RQ3: How to have effective motivation at company?

I.4 Rationale for the study

The study focuses to find out factors motivate employees in working environment Identifying the factors that promote positive motivational behavior among employees This will help leaders recognize and resolve negatives in employee’s behavior to keep loyal and devoted employees always beside Helping manage effective time and people management in organization From that, increasing competitive, productivity abilities on market

The rationale of this study is reflected very clearly through the case at Atlas Copco Vietnam Company, so the study benefits two primary groups The first group it benefits is managers in the company With the knowledge of what motivates employees, managers can better determine what drives employees to do their best work They can use this information to get more value out of the people they hire and already employ by using effective motivational strategies other than monetary incentives Managers need to know what drives their subordinates and peers in order to be effective leaders in the work

performance out of their employees and increase productivity in their departments The second group this study benefits is the employees Employees can use this information to determine what helps to motivate them as well as understand what motivates their peers

If there is a greater level of understanding and cohesion between employees and managers, the company as a whole will prosper

I.5 Scope and limitation of the study

This study was completed using the input of former and present employees of the Atlas Copco Vietnam Company in all different departments These employees were surveyed for the purpose of discovering what is most motivating to them in the workplace Employee motivation is defined as the eagerness or drive in an employee that directly influences their level of involvement or performance in the workplace Motivating factors are reasons for employee motivation, and in order to best evaluate and describe which of these factors are most and least critical to employees, we have split this study up into the following criteria: monetary factors and non-monetary factors

The study was limited to employees working in the company of Atlas Copco Vietnam at Binh Duong province All employees were surveyed live in Ho Chi Minh city area

The main questions in the survey asked about employees’ expectations of factors that motivate for them in their job It is possible that an experience in a real work environment will change in individuals’ opinions towards motivating factors

I.6 Research structure

This thesis will be divided into 5 main chapters The significant contents of each part will be illustrated as follow:

– Chapter 1: Introduction:

In this chapter an introduction will be presented on the topic of motivation The background lays the foundation for problem discussion where we will discuss the problem we discovered in the research area This will direct us to overall purpose and

research questions including delimitation Finally, it will present an overview of the entire thesis

– Chapter 2: Literature Review:

This chapter will present an outline of previous research done in the area of managerial perspective on motivation We will review existing research on what managers can do to motivate their employees, the factors of motivation and frameworks

– Chapter 3: Research Methodology:

It will be began by explaining the research method that we use in this study An explanation of the strategy and how we collected data as well as a sample selection will be explained Finally, we will discuss problems that appeared throughout this thesis and how we managed to overcome them

– Chapter 4: Analyses and Findings:

The data collected for this study through personal interviews The interview guide used for collecting data on the Atlas Copco Vietnam Company can be found in Appendix A and Appendix B This chapter contains the analysis of the data collected and findings on motivation This chapter will answer the stated research questions in chapter one

– Chapter 5: Conclusions and Recommendations:

The final chapter contains the conclusions and recommendations The conclusion states a foundation for possible implications on how to continue with this study We will provide implications for theory followed by implications for practitioners and finally, implication for future research

CHAPTER II: LITERATURE REVIEW

II.1 The concepts of motivation

II.1.1 Motivation

Motivating is the work managers perform to inspire, encourage and impel people

to take action (Louis Allen, 1986, citation from Michal Kirstein, 2010) Motivation efforts must be directed towards improving organization operations To be effective, however they must also be designed to show benefits to the employee In fact, motivation can best be accomplished when workers are able to merge their personal ambitions with those of the organization According to Robin and DeCenzo (1995) motivation is defined thus “the willingness to exert high level of effort to reach organizational goals, conditioned by the effort’s ability to satisfy some individual need” Campbell and Pritchard (1976, according to Michal Kirtein 2010) in defines motivation as a set of independents and dependant relationships that explains the direction, amplitude and persistence of an individual’s behavior holding constant the effects of aptitude, skills, understanding of a task and the constraints operating in the work environment Schrader (1972, according to Darren, 2008) linked construction worker need to motivation and it was subsequently concluded by Thomas et al (1990) that there is evidence supporting the existence of a linkage between an employee’s motivational level and their individual performance Atkinson (1964, according to Michal 2010) defines it as the contemporary immediate influence on the direction, vigor and persistence of action

The relationship between the employer and employee must be one of understanding in order for the employee to identify himself with his work and with the business he is working for Lack of motivation in return affects productivity A number

of symptoms may point to low morale: declining productivity, high employee turnover, increasing number of grievances, higher incidence of absenteeism and tardiness, increasing number of defective products, higher number of accidents or a higher level of waste materials and scrap (William Day, 1998) A motivated employee is a loyal employee and to be loyal implies that the employee supports the actions and objectives of

and quality of an employee’s performance (Martin Bruce, 1962, citation from Martin & Anders, 2004)

According to McClelland (1961, citation from Michal 2010) individuals tend to develop certain motivational drives on the cultural environment in which they live and these drives affect the way people view their jobs McClelland suggests that achievement, affiliation, competence and power are four types of motivational drives that are found

in individuals that are self-motivated and this may be the case for many construction workers Motivation plays a part in enhancing construction labor productivity (Smithers and Walker, 2000) and forms the basis for identification of the work environment factors For example, Laufer and Moore (1983) advocated the use of financial incentive programs

to improve construction labor productivity, reinforcing Maloney’s (1982) thesis of driving forces that led to productivity improvements Autonomy and comradeship of Edwards and Eckblad (1984) are also, found to be important aspects that add to the way construction workers are self-motivated about their work However, much work in linking motivation and productivity relied on Hertaberg’s sample involving mainly white-collar professionals (Mullins, 1996) Furthermore, Hofstede (1998) decried such motivational theories as merely point made about the ad nauseam emphasis on the managerial perspective in the quest to improve productivity

John Borcherding and Clarkson Ogelsby (1974, accoding to Michale 2010) discovered that productive job creates high job satisfaction while non-productive job (one which fall behind schedule) produce dissatisfaction at all levels of the management/worker chain The relationship is believed to be due to the very nature of construction, thus different from the one found in an office or factory setting which states that high job satisfaction leads to greater productivity In construction, a worker, through his own efforts produces a highly visible, physical structure in which great satisfaction comes from completion Therefore, jobs that are well-planned and run smoothly produce great satisfaction while jobs with poor management (with scheduling and planning problems) create dissatisfaction This illustrates the relationship between job satisfaction and productivity since; well-managed jobs are generally more productive

A close review of all theories of human motivation reveal a common driving principle that people do what they are rewarded for doing In general, the theories on

motivation can be classified as: employee needs motivation through goal setting, employee reward, incentives and reinforcement

Marusarz’s comment echoes Frederick Herzberg’s theory of motivation, which states that the factors, which motivate people at work are different, and not necessarily the opposite of the factors, which cause dissatisfaction Herzberg claimed that positive hygiene factors such as work conditions and salary simply satisfy basic employee needs, whereas motivators (e.g achievement and recognition) encourage employees to work above and beyond the minimum requirements In 2006, the HR Daily Advisor reported that 89% of employers think their people leave for more money, while only 12% of employees actually do leave for that reason

"Compensation alone is not enough to keep the highly skilled motivated and experienced workforce your business needs to excel" (Greenburg, 2008) In a four years analysis of more than 100,000 employees worldwide, the Corporate Leadership Council discovered that while workers join companies for rational motives (better compensation, benefits and career opportunities), they are and work hard for emotional ones (Jean Martin and Lawler, 2008)

Furthermore, according to W.Stanton Smith (2008), a new generation of workers, the Millennials, is entering the workforce with a desire for long-term employer relationships on their own terms This new group is shaking up the workforce and demanding more from their employer than simply financial compensation for their work and ability to be ‘on-call’ at all times thanks to communication technologies According

to Towers Perrin (2007), employees are more interested in ‘talent friendly’ organizations that offer a good work-life balance than those offer high salaries

II.1.2 The Work Motivation

The term motive usually is explained as desires, needs, emotions or impulses that make someone do something Following this definition, motivation is the state of being incited to action When we take into consideration work environment it becomes clear that work motivation refers to motivation within a work setting Typically, it refers to employees’ motivation to perform, stay and commit in a company, cooperate, lead or

International Encyclopedia of Organizational Studies (ed Bailey & Clegg, 2008) is just

an example from a mass of work motivation definitions, which can be found in almost every paper about this topic Some authors define what motivation is by explaining where

it comes from In this approach work motivation has been defined as “a psychological process resulting from the reciprocal interaction between the individual and the environment that affects a person’s choices, effort, and persistence” (Latham & Ernst, 2006) In other definitions work motivation is associated with the goal attainment People are motivated to do something if they believe it is likely that it will bring desired result People who are well motivated take action that they expect will achieve their clearly defined goals (Armstrong, 2007) Kanfer (1990, as cited in Bjorklund, 2001) stressed that motivation is a phenomenon, which cannot be directly observed The only way to infer motivational processes is to analyze streams of behavior caused by environmental or inherited factors, which can be observed through their effects on abilities, beliefs, knowledge and personality

There are probably as many definitions of motivation as researchers working on this topic However, there are some features of motivation that are common for most definitions It can be observed from the examples presented above that when authors describe motivation they mention an action or behavior that is directed and sustained as a result of motivation In other words motivation is usually described as an invisible force that pushes people to behave in a certain way For the purpose of this thesis definition by Pinder (1998) will be used, as it seems to define motivation both in a comprehensive and explicit way Pinder used work of Jones (1995), Locke, Shaw, Saari, and Latham (1981), Steers and Porter (1979), and Vroom (1964) to formulate following definition (1998, p.11): “Work motivation is a set of energetic forces that originate both within as beyond an individual’s being, to initiate work-related behavior, and to determine its form, direction, intensity, and duration”

Pinder (1998) believes that presented definition has some features that make it better than others Firstly, it is not general as many other definitions, it presents motivation in a close relation to work and careers His definition is intended to apply behavior such as joining or leaving company, being punctual, respecting or not supervisor’s orders, inventing better ways to performing a job and accepting relocation to

another place According to Pinder one of the key elements that are important in defining motivation is a concept of force It not only makes the definition consistent with other authors work but also allows motivation level to be weak or strong depending on circumstances The idea of force suggests that motivation is related to an effort Pinder believes that effort is a consequence and indicator of motivation rather than the same phenomena He points out that his definition does not present hedonism as a primary force in work motivation However, it does not exclude it either There are three more important elements of Pinder’s work motivation definition: intensity, direction and duration Author describes the intensity dimension using two terms created by Brehm and Self (1989) – potential motivation and potential arousal The first of those two terms is created by expectations that performance of behavior will affect final outcome The second term is dependent on magnitude of potential motivation and occurs only to the extent that particular behavior is difficult In Pinder’s opinion intensity is not affected by the potential available and is defined as the transient size of motivational arousal in a particular point of time The direction can be understood by considering towards which goals the energy of motivation is directed Finally, the duration suggests that goal achieving might be a possible outcome of on job behavior As the last but also very important feature of the definition Pinder mentions the fact that motivation is presented

as a hypothetical construct which cannot be measured or seen directly but is treated as an existing psychological process

Ray William (2010) illustrated “Ask workers what makes them unhappy at work, and you'll hear them talk about insufficient pay or an uncomfortable work environment,

or "stupid" regulations and policies that are restraining or the lack of job flexibility and freedom.” It turns out that people are motivated by interesting work, challenge, and increasing responsibility, they are intrinsic factors Moreover, people have a deep-seated need for growth and achievement

What do we mean by motivation? It's been defined as a predisposition to behave

in a purposeful manner to achieve specific, unmet needs and the will to achieve, and the inner force that drives individuals to accomplish personal and organizational goals And why do we need motivated employees? The answer is survival Motivated employees are

needed in our rapidly changing workplaces, and to be effective, managers need to understand that and do something about it

II.2 The Motivation Theory

The subject of motivation has been present in the literature from the early beginning of 20th Century Although, many theories have been developed and a plenty of research has been conducted, factors that motivates people to perform well at work are still a controversial topic Many researchers as a starting point for their work in the field

of motivation used the most known theories and models of motivation Armstrong (2007)

in his book about employee reward management summarized those theories in a clear and useful way According to him, Taylor’s theory of motivation to work is related to rewards and penalties, which are directly connected to performance Maslow’s concept of hierarchy of needs is less instrumental approach It defines motivation as a result of peoples unsatisfied needs Herzberg focused on a distinction between extrinsic and intrinsic motivators Those “old” theories are definitely important, however they are not perfect Analysis showed that they are characterized by some significant weaknesses Armstrong presents modern, process theories, which approach motivation from different perspective As an example, Vroom’s expectancy theory explains that motivation exists only when relationship between performance and outcome is clear and usable Goal theory emphasizes the role of a feedback and setting goals in relation to motivation and performance Finally, Equity theory says that people are more motivated if they are treated equally

In the previous part of this paper a number of motivation definitions have been presented Each of existing definitions has some strengths and weaknesses Exactly the same can be said about motivational theories As one can observe from the short overview presented above there are many different theoretical approaches to the topic of motivation Motivation for a group of authors is strictly related to human needs, while point of view of other authors is much more focused on cognitive processes that influence peoples’ behavior In the literature of the subject those differences between theories resulted in a division in two categories: content and process theories In the next

part of this paper the most important theories from each category will be presented and analyzed

II.2.1 Content theories

The content theories are characterized by emphasis on what motivates people They concern with individual goals and needs, which are said to be the same for every person Although, they assume that all people posses a similar set of needs, the differ in defining what those needs are The most well-known and very often cited author of motivational theory is Maslow with his hierarchy of human needs (Fincham and Rhodes, 2005) In Maslow’s point of view human behavior is driven by the existence of unsatisfied needs His hierarchy starts from psychological needs and lead through security needs, social needs, self-esteem needs and self-actualization needs on the top position (see figure 1)

Figure 2: Maslow’s hierarchy of needs Source: Mazlow's Hierarchy of Needs.svg

According to Maslow, higher needs are not felt until lower needs are not fulfilled Additionally, when the need is satisfied it does not influence human behavior anymore and as a result the focus is moved into a need, which is higher in the hierarchy Maslow divided needs into two categories: deficiency needs and high-order needs Deficiency needs include basic needs such as hunger or thirst and a need for shelter and protection When these needs are satisfied people become motivated by high order needs such as the need for supportive and satisfactory relationships with others, needs for freedom, independence, recognition and achievement and finally the need to develop one’s potential The self-actualization, which is the highest step in Maslow’s pyramid, can be described as the ending point of gradual psychological maturation process This final level is achieved by few people and unlike other needs is never fully satisfied (Fincham

& Rhodes, 2005)

Maslow’s work on the theory of needs has been followed by other authors who took an attempt to improve it One of modifications was presented in 1973 by Alderfer, who developed and tested model with fewer needs levels (Pinder, 1998) His study, unlike Maslow’s, was based on empirical research in organizational settings The theory suggests three general categories of human needs, which are partly based on Maslow’s model but are not the same Alderfer’s model is named ERG and consists of existence needs, relatedness needs and growth needs The first group is closely related to Maslow’s physiological needs and partly to security needs (only physical security) Existence needs are concrete in nature and are usually limited A good example of them in organization setting is a salary If money has to be divided between two groups - the more money receives one group, the less gets the other group Relatedness needs basically consist of the interpersonal security needs, the need for prestige and esteem from others Satisfying relatedness needs requires development of relations and interactions with other people The last group of needs in Alderfer’s theory contains growth needs Although, growth needs are corresponding to Maslow’s self esteem and self-actualization needs there are some major differences in a point of view of those two authors Maslow suggested that self-actualization consist of a fulfillment of unique, innate potential, whereas Alderfer’s growth needs contain desire to interact with environment by

investigating, exploring and mastering it In Alderfer’s model growth needs change if one’s environment changes (Pinder, 1998)

The next important contributor to the field of content theories is McClelland whose model became a starting point for many other authors’ research McClelland’s theory focuses on three motives that are relevant in an organizational context (Miner, 2006) Maslow differentiated between any certain transitions among the needs, whereas McClelland indicates that some people have higher needs than others Moreover, needs in McClelland’s point of view change over a life as they are shaped by peoples’ experience That is why in some sources his theory is called “acquired needs theory” McClelland (1990) suggested that most of acquired needs can be classified to one of three groups: achievement needs, power needs or affiliation needs In his opinion some people have a strong need for achievement others for power and finally there is a group that desire affiliation High achievers tend to perform better for the intrinsic satisfaction for doing something better or just to show that they are more capable of doing something They prefer to work with tasks, which are moderately challenging and they actually perform better with those kinds of tasks In one of their papers McClelland’s and Burnham (1976) deliberate on what makes people good managers They suggest that high achievement is

an important factor that leads to the personal success but it does not necessarily make someone a good manager High achievers work on their own success by doing everything personally and by receiving feedback that is crucial for them Managers are not able to do everything by themselves so they have to put some responsibility on others As well as that, the feedback that they receive comes with a delay, so they are not able to find out immediately how well they performed Regarding those facts McClelland’s and Burnham stated opinion that the factor that has a great influence on being a successful manager is something else than a need for achievement They suggested that it is the need for power that is characterized by a desire to influence people McClelland (1990) found that people who desire to have some serious influence on other have some special traits The high need for power usually comes with features such as competitiveness, assertiveness and aggressiveness, which result in a negative self-image The socially acceptable way to fulfill the need for power is the search for prestige by collecting symbols of power

recognized in a group Finally, they are more willing to take a risk The last group of needs described by McClelland’s model is the group of needs for affiliation The term affiliation was described by Atkinson, Hens, & Verify (1954), as “the concern over establishing, maintaining, or restoring a positive, affective relationship with another person or persons” (as cited in McClelland, 1990, p.347) People with a strong need for affiliation perform well in tasks which are related to incentives In other words, they prefer if their work require maintaining contacts with other people High affiliated individuals avoid conflict and prefer to solve problems by cooperative and confirmative behavior The reason for that is the fear for rejection McClelland’s findings suggested that the need for affiliation is not a factor that supports management Managers high in affiliation try to spend more time with employees and make good relations with them, but

it is not a crucial part of being a manager, who sometimes has to make hard decisions (McClelland, 1990)

The last content theory that will be presented in this chapter is Herzberg’s two- factor theory The theory brought a lot of interest from academics and from managers who were looking for ways of motivating their employees The reason for so much interest in Herzberg’s results comes from a dual character of his work His theory not only describes employees’ needs but also goes further and presents how to enrich jobs and make workforce more motivated (Fincham & Rhodes, 2005) Herzberg indicates that job satisfaction and job dissatisfaction are not opposite phenomena (Herzberg, 1968) According to him the opposite of satisfaction is rather no satisfaction and the opposite of dissatisfaction is no dissatisfaction Herzberg suggests that satisfaction and dissatisfaction are produced by different factors People are satisfied at their work by factors related to content of that work Those factors are called intrinsic motivators and contain achievement, recognition, interesting work, responsibility, advancement and growth Factors that make people unhappy with their work are called dissatisfiers or hygiene factors Herzberg found following dissatisfiers: company policy, supervision, working conditions, interpersonal relationships, salary, status, and security What makes them different from motivators is the fact that they are not related to the content of the work but to the context of the job (Herzberg, 1974) Figure 2 presents a frequency of each

factor in Herzberg’s research and their division into hygiene factors and intrinsic motivators

Figure 3: Herzberg’s theory – factors affecting job attitudes Source: Herzberg, F (1974) One more time: How do you motivate employees?

Harvard Business Review Jan2003, Vol 81 Issue 1, p90

In Herzberg’s research the most frequently chosen factors which led to satisfaction were achievement and recognition, while the most frequently chosen factors which led to dissatisfaction were company policy and administration and good relations with supervisor

Each of presented here content theories has some strengths and weaknesses It

problem but they missed other important side Motivation of employees is really important topic, so every research in this subject is observed and evaluated by other researchers As a result some researchers agree with and support original theories and others disagree and criticize them In other words, the most well known theories in motivation bring some serious controversies As an example, Maslow theory became popular despite a little evidence for its validity As well as that, very often it seems to be presented in an oversimplified way (Pinder, 1998) Moreover, Maslow’s originally did not intend to create a theory that will be used to explain organizational behavior Finally, his hierarchy does not appear in some circumstances, so it cannot be generalized to the whole population (Fincham & Rhodes, 2005) The validity was taken in consideration in evaluation of Alderfer’s theory Also McClelland’s theory was followed by many others researchers who tried to check if author was right (Rauch & Freese, 2000; Aditya, House

& Kerr, 2000; Shane, Locke, & Collins, 2003; Vecchio, 2003; as cited in Miner, 2005)

In fact their results were not always completely supportive for McClelland’s model Herzberg’s two-factor theory was criticized for biases caused by selection of just two occupational groups Another reason for skepticism is the fact that people tend to explain their success by internal factors and their failure by external reasons That could influence their choices of intrinsic motivators in relation to satisfaction and of external, organizational factors in relation to dissatisfaction (Fincham & Rhodes, 2005) Herzberg results were also attacked because he did not try to measure relationship between performance and satisfaction (Armstrong, 2007) As can be seen from this short overview

of controversies and overlaps on content theories not every theory managed to defend it during decades However most of them influenced the growth of interest in the topic of work motivation In the next part of this paper more recently developed theories will be described and analyzed

II.2.2 Process theories

Process theories are characterized by a dynamic character, not static as content theories The main concern is not what motivates people but how motivation occurs Process theories try to explain how and why peoples’ behavior is directed to certain choices The focus of all process theories is put on “the role of individual’s

cognitive processes in determining his or her level of motivation” (Fincham & Rhodes,

2005, p.202) The process theory which seems to be the core one is the Expectancy Theory This model was originally presented by Vroom (1968), however many other later researchers tried to adapt and develop it Vrom’s Expectancy theory compromises three factors: valence, instrumentality and expectancy Vroom describes valence in a relation to peoples’ affecting preferences toward particular outcomes The valence of outcome is positive if a person prefers attaining it instead of not attaining Oppositely, the negative valence of outcomes characterize situation when a person prefers not attaining it instead of attaining The third possibility is zero valence of outcome, which means that a person is indifferent between attaining outcome or not The instrumentality is a belief that one action lead to another Finally, the expectancy is defined as a belief about likelihood that a particular behavior will be followed by a particular outcome (Vroom, 1964) Values of those three factors can be used to calculate the motivational force of the job Summarizing, Vroom’s theory suggests that a job is motivating for employees when they can see a relation between performance and outcome, if they have abilities to do the job and if they see outcome as satisfying their needs Vroom’s theory can be a suggestion for managers to focus on main aspects of their subordinate perceptions As well as that, it

is helpful in explaining occupational choices and in predicting tasks that people will work most and least hard at (Fincham & Rhodes, 2005)

Another group of process theories - equity theories, are related to the distribution of resources There are three main aspects that are common for all equity theories Firstly, they suggest that employee perceive a fair return for his contribution at work Secondly, they imply that employees compare the return they received to the return received by other for the same job Finally, they assume that employees who are in inequitable position comparing to others will try to do something to reduce the difference (Carrell & Dittrich, 1978) The most influential and often cited in the literature of motivation is the Equity Theory, which was put forward in 1963 by Adams The theory distinguishes between employee’s inputs and outputs Inputs are understood as the number and value of contributions that person make to his or her work Outputs are described as the nature and quantity of received rewards for doing the job (Pinder, 1998)

Figure 4: Adam’s Equity Theory – job motivation Source: JS Adam’s Equity Theory (1963) Material is at www.businessballs.com

According to Adam’s theory different employees stress different inputs and outcomes as the most important for them However, all people evaluate their outcomes in

a relation to their inputs and judge a fairness of this relation What is suggested by the theory is the fact that people not only evaluate the equity by comparing the amount of their inputs and outputs but additionally they make social comparisons with other people They feel that they are not treated fairly if other people receive better outputs for the same job As was stated before, employees who encounter inequity try to do something to reduce it The equity theory presents the most common consequences of perceived inequity The first and the most common behavior is changing employee’s own effort to increase or reduce performance If it is not possible to solve the problem of unfairness by

means for example reconsideration of own credentials or effort in a comparison to credentials or effort of a person who was chosen as a referent The inequity may lead to some dysfunctional reactions such as stealing from employer Finally, employee may simply decide to withdraw from a company (Pinder, 1998)

Any chapter related to the process theories of motivation would not be complete without mentioning results of Locke and Latham’s work Those authors introduced the goal setting motivation technique, which, according to them, is not only more effective than other methods, but also can be treated as a support for them (Locke & Latham, 1979) In their approach a goal is defined as an object or aim of an action that is attained in a specific limit of time The one of their core findings is that the highest level of performance and effort are produced when the difficulty level of attaining goals is also very high The only limit here is an ability of a person who tries to attain a goal Authors found that people perform better if a specific difficult goal is set than if they are asked to perform as well as they can (Locke & Latham, 2002) What was surprising in Locke and Latham (1990) results was that performance does not differ regardless goals are assigned

to people or if people participate in choosing their own goals Authors explain it by the fact that usually superior that assigns the goal is treated like an authority Moreover, the act of assigning a goal means that superior believes that subordinate has ability to fulfill that goal In a result people became motivated to prove their competences Finally, the assigned goals are helpful with defining peoples’ standards used to attain their self- satisfaction from performance (Bandura, 1988, as cited in Locke & Latham, 1990) If there is an influence of setting goals on peoples’ performance there must be some mechanism that explains it In fact, Locke and Latham (2002) basing on their own research and other researchers results (LaPorte & Nath, 1976; Wood & Locke, 1990), distinguished even four of them First, goals direct effort and attention toward all activities that are related to achieving them Difficult goals lead to more effort than easy goals, so it can be said that goals in general have energizing function Moreover, they prolong effort, so they affect persistence The forth mechanism is an indirect action caused by goals that lead to the discovery, arousal or to use of task-relevant strategies and knowledge The influence of goals on performance can be stronger in some

which occurs when the attainment of a goal is important for him and he believes that he is able to achieve it Another important factor that was mentioned by authors is a feedback that helps people to adjust a level of effort needed to attain the goal (Locke & Latham, 2002)

II.3 The effects of motivation on employees

The authors of theories presented in previous parts of this study tried to explain what motivate people to work The answer to this question is important because it is obviously good to understand what influence people behavior However, it is not the only reason for a great interest in the topic of motivation Managers might look for ways to motivate employees because they assume that motivation can lead to some positive outcomes for a company The question that can be stated is if motivation really has influence on peoples’ performance at work Researches show that indeed there is a relation between motivation and performance (Deci & Gagne, 2005) However, motivation and performance cannot be treated as equivalent phenomena The distinction between them was noted by Vroom (1964) He suggested that effective accomplishment

of a task is not only related to motivation but also to other factor The picture that emerged from his studies suggested that even if people are motivated they cannot perform well if they do not posses abilities to fulfill the task In Vroom’s point of view motivation and abilities are equally important In his opinion more is to be gained by increasing ability from people who are highly motivated to accomplish the task than from those who are not motivated Vroom used indication from existing data and described relationship between motivation and performance

In other words performance is not constantly increasing when level motivation is rising Vroom (1964) cited an early study of Yerkes and Dodson (1998), which showed that that highest level of motivation does not lead to the highest performance, especially when the task is difficult In fact, extremely high levels of motivation lead to lower performance than moderate levels This relation is explained in two ways First assumes that high levels of motivation narrow the cognitive field Second suggests that highly motivated people are afraid of failure and that results in a lower performance Other

restricted practices of their superiors, limits of company policies and physical work environment – lightening, temperature, noise or availability of materials (Hall, 1994; Baron, 1994, as cited in Pinder, 1998)

Limitations of peoples’ performance are an important subject However, it seems that there are more studies that search for the answer to the question what can positively influence performance of employees Companies often use incentives to motivate their employees Meta-analysis on the effects of incentives on workplace performance conducted by Condly, Clark and Stolovitch (2008), shows some interesting findings The authors found that average effect of all incentive programs in all work settings lead to 22% gain in performance It means that incentives can significantly increase performance but, as authors claim, they have to be carefully implemented Results of this study indicated that some settings are better than others to increase performance For example, if we take into consideration incentive programs it comes up that they lead to better performance of employees if a mechanism of the program includes competition between employees to earn a bonus Another important feature of incentives programs is their length Long programs increase performance more significantly that short programs One of the greatest differences between levels of performance in authors’ analysis was between incentives offered to teams and individuals Team directed incentives have much stronger effect on performance than individual directed incentives Finally, incentives have less significant impact if they are used to get people do something than to get people do the job in a smarter way or to be more persistent at job that people already started The last important finding of the study was a relation between

a type of incentives and performance Studies indicated that monetary incentives resulted

in a higher performance than non- monetary incentives (Condly, Clark, & Stolovitch, 2008)

Frey and Osterloch (2002) in their book about successful management by motivation stressed an important fact that can explain relation between performance and motivation They suggested that different people have different goals in their life Therefore, particular motivators influence performance of individuals differently There are employees who are motivated extrinsically Authors divided them into two types:

earning money for consumption goods and they find work an unpleasant duty Status seekers search for social comparisons Work for them is a tool to gain “positional goods” that shows their high status Employees can be also motivated intrinsically There are three groups of them characterized by specific features Loyalists identify personally with the goals of company they work for Formalists are focused on procedures and rules existing in a company, while Autonomists pursuit for own ideology Defining those types

of employees helps to predict which kind of motivators are effective in increasing individuals’ performance As an example, performance-related pay increases performance of Income maximizers, especially when it is paid out as money rather than fringe benefits The condition that has to be met is that employees see clear relationship between compensation and performance Status seekers can also be motivated by wages

as long as they let them distinguish themselves from other people In their case compensation does not have to be in a form of money They would rather prefer other benefits that directly show their status Performance-related pay can also reduce performance Loyalist may understand this kind of rewarding as a signal that their work

is considered by company as inadequate Formalists also may feel that company tries to change the way they work Finally, Autonomists would lose their intrinsic motivation because their self- fulfilling work concept is put on doubt Not-financial rewards also need to be matched with employees’ types For example praise would be desired by Status seekers but would be not motivating at all for Income maximizers who cannot buy anything for it Autonomist may feel that management try to absorb them into the organization and Formalists may not appreciate praise as they “just do their job” Another way to increase performance is implementing commands and sanctions This way would

be effective for Formalists who understand them as a guide On the other hand, it can dramatically reduce performance of other types of employees Income maximizers, Status seekers, Loyalist and Autonomist see commands as restrictions, what result in crowding-out their intrinsic motivation to work Participation can be helpful tool that positively affect performance of Autonomist but it would be treated as waste of time by Income maximizers and Status Seekers as they are not interested in the work itself Finally, autonomy understood as possibility to make own decision is crucial for Loyalist and would definitely increase their performance For other types of employees autonomy

would not be an effective way of increasing their efforts The characteristics of employees’ types presented here suggest that people have different expectations and desires at work Some rewards can be really rewarding for them but others are rather seen

as factors that negatively influence their performance (Frey & Osterloch, 2002)

II.4 The Motivation Factors

Employee motivation can be investigated in many different ways The one of approaches to research on employee motivation is looking for factors that are most often chosen by employees when they are asked to decide what motivates them at work The most common method to collect data in this kind of studies is a survey It usually consists

of a number of motivating factors that are supposed to be ranked or assessed There is a long history of research on motivating factors Sonawane (2008) in her paper about rewards mentioned the most important studies on this topic As she suggests one of the first survey about motivating factors was conducted by Lindhal (1949) The result of those studies indicated “full appreciation of work done”, “feeling of being in on things” and “interesting work” as the most important motivators for employees Another mentioned author who through questionnaires distinguished the most important factors was Herzberg (1968) He suggested that the order for crucial factors is following: Security, Interesting work, Opportunity for advancement, Appreciation, Company and management, Intrinsic aspects of the job Another example comes from Keller’s (1965) research In his research ranking was opened by Job satisfaction on the first position and was followed by Pride in organization, Relation with fellow workers, Relation with superiors, Treatment by management, Opportunity to use ideas, Opportunity to offer suggestions at work and Appreciation of one’s effort Sonawane (2008) cited Jurgensen (1978) as his studies showed interesting differences between subgroups of respondents The study was conducted on a sample of fifty-seven thousands job applicants It showed significant difference between male and female choices regarding motivating factors Males indicated Security, Advancement, Opportunity and Type of work while females chose Type of work, Company and Security as the most important factors Another cited study was conducted by Sharma (1989) in 51 organizations in India

most important by Indian workers As was suggested in a previous chapter of this paper leadership style plays important role in motivating employees This suggestion is confirmed by results of the survey that asked people to rank factors taken into consideration when they decide whether take the job or not Respondents’ choices included Open communication, Effects on personal/family life, Nature of work, Management quality (Nelson, 2001, as cited in Sonawane, 2008) Job design factors such

as Advancement opportunities, Flexible work schedules and Opportunities to learn new skills were chosen in a survey by Watson Wyatt in 2006 (as cited in Sonawane, 2008) Kinnear and Sutherland (2000) focused on knowledge workers and factors that motivated that occupational group They found that Financial reward and recognition was the motivator ranked at first place Knowledge workers were also strongly motivated by Freedom to act independently, Developmental opportunities and Access to new technologies A comparison of this study with other studies leads to the conclusion that specific occupational groups may be motivated by other factors than other groups The difference between groups of respondents was also noticed by Kovach (1980, 1987, 1995) His studies seem to cover many important areas from previous research on motivational factors mentioned in this short overview Moreover, he was followed by other researchers who replicated or modified his researches to find out more about the topic All these features make Kovach’s work interesting and therefore will be a subject

of more detailed analysis

Kovach has been doing research and practically work on employees’ motivation for over 20 years He conducted survey in 25 organizations and had responses from 1000 participants Respondents were asked to rank factors on the list that contained: 1 Interesting work, 2 Full appreciation of work done, 3 Feeling of being in on things, 4.Job security, 5 Good wages, 6.Promotion and growth in the organization, 7.Good working conditions, 8 Personal loyalty to employees, 9 Tactful discipline, 10.Sympatetic help with personal problems Presented order of factors is the actual order that came out from Kovach’s (1980,1995) results The three most important factors in respondents’ opinion were Interesting job, Full appreciation of work done and Feeling of being on things Kovach compared those findings with findings from similar surveys from 1946 and 1980 The comparison showed the difference between answers from 1946

and both later surveys Workers in the middle of the century on the first position placed full appreciation of work done Interesting work was placed on the sixth position and sympathetic help with personal problems was on the third position - much higher than in later studies Those differences could be caused by economic growth and changes in standard of living The difference between employees’ choices in the different points of time is interesting but it was not the main finding of Kovach’s studies The crucial part of Kovach’s research was comparison of responses given by employees and supervisors who were asked to rank factors that motivate their subordinates It became clear that supervisors have very inaccurate perceptions about their employees needs The most important factors for employees according to managers were: 1.Good wages, 2.Job security, 3.Promotion and growth in the organization Supervisors’ answers were the same in different points of time Kovach (1987, 1995) suggests possible reasons for such significant differences Employees might give more socially desired answers, but on the other hand they may be simply better witnesses of own motivation that their supervisors Supervisors may choose factors that they are not directly responsible for, such as wages Finally, managers might be motivated by other factors than employees Possibly, by taking themselves as a reference point they rank factors in a different way than people on lower positions Another step that Kovach (1995) took was comparing subgroups He indicated that there was no statistically significant difference between males and females However, it could be noticed in the ranking that women chose Full appreciation of work done on the first position while man chose Interesting work The comparison between different age groups showed that employees who were under 30’s were characterized by similar answers as supervisors Differences were also observed between groups with lowest income and lowest position in the organization and groups with high income and position Kovach’s studies were replicated by other authors Linder’s research (1998) indicated Interesting work and Good wages as the most important motivators for university workers Results from a survey conducted by Harpaz (1990) on a representative sample of employees in seven countries showed the same two factors as the most important motivators Fischer and Yuan’s research (1998) also compared employees from various countries They indicated that Chinese employees ranked Good

factors Their findings showed that Chinese managers, oppositely to US managers, were able to provide appropriate answers to the question what motivate their employees

To summarize, there are several factors such as Good wages, Interesting work, Job security and Promotion and growth that were ranked highly in a majority of studies However, presented results suggest that employees’ choices may differ according to respondents’ culture, occupation, gender, position in the organization and salary This means that organizations which want to focus on motivating particular group of employees need to be aware of the fact that some factors that motivated one group could not work well with other group

II.4.1 The Monetary Factors

Basically, employees work because of money and they desire to receive fair wages and salaries for their contributions Whereas employers want their workers to feel that is what they are getting and at the same time wish to maximize firm value Hence, it

is rational that employees and employers perceive money as the basic incentive for satisfactory job performance

These factors will focus on individual monetary incentive systems for two reasons First, they are currently one of the two most prevalent types of variable pay systems in business and industry Second, they provide the tightest link between performance and pay; a factor that compensation specialists have historically cited as the most important one when the goal of the pay plan is to increase employee productivity (Conrad, 1994; Kopelman, 1983; Lawler, 1990; McAdams & Hawk, 1992; McNally,1988; Opsahl & Dunnette, 1966; Taylor, 1911) The tight link between performance and pay or, in Lawler’s (1990, 1992) terms the clear “line of sight,” results from four characteristics of individual incentive systems: First, incentives are based only

on the employee’s own performance; second, incentives are based on clearly specified behaviors or outputs; third, incentives are certain (that is, if the targeted performance occurs, the employee will receive the extra compensation); and fourth, incentives are paid

as soon after the performance as possible as part of the employee’s paycheck Not only have compensation specialists identified these char- acteristics as important, but these

employee rewards and consequences (Braksick, 2000; Brown, 1982; Daniels, 1989; O’Brien & Dickinson, 1982)

Campling, Poole, Wiesner and Schermerhorn (2006) suggest that the use of monetary incentives in the classic ‘work performance paradigm’ is based mainly on the

‘Reinforcement Theory.’ Under this theory, managers must concentrate on the relationship between target behavior (job performance) and its consequences (pay), as well as emphasized on the principles and techniques of organizational behavior modification Campling et al (2006, p.398) define organizational behavior modification

as ‘the application of operant conditioning to influence human behavior at work.’

Employee productivity, however, is only one reason that organizations adopt variable pay plans Different pay plans yield different results, and organizations adopt them for different reasons (Lawler, 1990, 1992; Ledford & Hawk, 2000; McAdams & Hawk, 1992; O’Dell & McAdams,1987) For example, O’Dell and McAdams (1987), based on a large-scale survey, stated that profit sharing increases employee commitment and reduces turnover but does not affect productivity, quality, or cost reduction as much

as other plans, whereas individual incentives increase productivity and information sharing but do not alter employee involvement or employment security

The effectiveness of individual monetary incentive systems can be attributed to the fact that when employees are offered individual incentives, with or without guaranteed base pay, the amount they earn in incentive pay is dependent upon the number

of units of work they complete According to Ballentine, McKenzie, Wysocki and Kepner (2003), monetary incentives include salary increases, profit sharing plans, stock options, warrants, individual and small-group rewards, merit pay, project bonuses, and additional paid vacation time The purpose of such incentives is to reward employees for outstanding job performance through money

Monetary Factors Including:

- Salaries or wages:

Salaries or wages is one of the most important motivational factors Reasonable salaries must be paid on time

- Special individual incentives:

The company may provide special individual incentives Such incentives are to be given to deserving employees for giving valuable suggestions

II.4.2 The Non-Monetary Factors

Non-monetary incentives are the tangible rewards, social practices or job related factors that are used in an organization to motivate employees without direct payment of cash

Social non-monetary incentives are related with superior-subordinate relationships and the social activities within the organization Superiors being sincere and caring in communicating with the subordinates and valuing their opinions, the degree

of informal or formal recognition for a good job, various social activities in which employees of the same organization get together in an informal way for celebrating something or just to release the stress of the work etc all contribute to the creation of a working atmosphere that employees feel themselves valuable as part of an entity This in turn has the potential to motivate employees without offering monetary incentives

Job related non-monetary incentives have the potential to motivate employees intrinsically Jobs with variety of tasks, responsibilities, autonomy, flexible working hours, participation in decision making, development opportunities etc are very important in satisfying employees certain needs and they may lead to a feeling that the job itself is worth exerting more effort without need to any external incentive

The importance of non-monetary incentives in motivating the employees is supported by various studies and mentioned in writings of many authors Janet Wiscombe