A manager is required to evaluate the performance of his/her subordinates, usually on a yearly basis. Their recommendation is the basis for an extra payment – the merit pay.

Merit pay plans allow to differentiate the high performers from the rest and to reward for a non repetitive task. Most researchers agree that they are not really working.  The main issue could be that the employee’ performance is judged in a subjective manner by the manager.

The lack of effectiveness comes from:

• Low discrimination distance. When there is no accurate measuring system in place, a manager will have the tendency to equalize the merit pay. This will make high performers unhappy, and low performers confused.
• Merit pay is too small. Because the merit pay is calculated as percentage from the salary, it will go unnoticed, and the level of satisfaction will not act as a motivator.
• Pay level is secret. Merit pay is too. Most of the companies in this world impose a policy of secrecy over wages, benefits and bonuses. I am sure that there arguments in favor of this. But, companies are made of people. When people do not know something they assume or invent. You can be sure that everybody will think that the other is paid better! Job satisfaction and motivation will decrease exponentially. If merit pay is kept secret, none of the employees will know who performs better and how much is performance paid with.

The methods of evaluating performance are evolving all the time. I think that, by now, there are enough objective criteria even to evaluate “the impossible to evaluate in numbers” white-collar employees’ performance. Merit pay could work only if managers give up their royal right of granting rewards and punishment based only on their subjective reasoning.

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The concern for motivation in the work environment has change the purpose of job design. Job satisfaction, performance, customer satisfaction, and quality of working life are the goals that must be accomplished through job design and the associated techniques: job enlargement, job enrichment, job rotation.

Job scope is defined as a combination of the number of different activities performed by an employee and the level of control that an employee has upon how to perform those activities.

A manager has a high scope job because he performs a large number of activities (see Management – art of controlling processes and outcomes) and has a broader or narrower decision-making power.

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You make an effort and expect a performance. If performance is achieved you have the expectancy of a reward that will satisfy a need. All this process will take place only if you decide that satisfying your need worth all the effort.

Victor Vroom – Expectancy Theory is based upon the following three beliefs:

• Valence (from latin valent-, valens – to be strong) – refers to the strength that an individual has to prefer a particular outcome. In short: What’s in it for me?
• Expectancy – is what you think you can do and what the result will be.
• Instrumentality – is your carrot & stick process. Your perception that the work you do will get you paid.

We have also a little formula for this: Expectancy x Instrumentality x Valence = Motivation. This formula can be used to analyze things like: job satisfaction, choices of occupation, stability on the same job, effort that an employee will put in at work.

What a manager can do according to Expectancy Theory is to clarify the path of the employee by providing proper tools and training, an easy to understand performance evaluation system and mostly by listening to his problems.

If every individual has preferences for defining outcomes (higher pay, promotion, etc) it will be only common sense for a manager to define a motivational package accordingly.

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For an employee the company is supposed to be a family, a place in which you feel good, this being the main motivation and not the money. How about we treat this as a business for both sides? It is always about money. If next to money comes a pleasant social interaction and higher purposes … is fine.

When you negotiate your salary, the employer will try to pay you the smallest amount possible. The funny part is that if you tell the interviewer that you are there for the money, they will put you at the end of the list. So you lie and the carousel starts: they will think they tricked you and expect performance, you will be unsatisfied and will do work in … the smallest amount possible.
Everybody loses.

It should be a fair trade. You give your time and your competencies and you ask in return what you need and not what is offered.

Remember: You are part of the negotiation process and not the subject of negotiation. Personal branding should become your favorite jacket. The more you know about yourself, the more conscious you become of your value on the labor market.

Everything that is said about organizational behavior must respect the fair trade principles.

• Transparency and accountability
• Payment of fair price
• Gender equity
• Decent work environment
• Trade relations

We are so used to having freedom of speech but we do not care about our freedom to act. No matter the country, although the employer asks more work and dedication from you every day … he loves you until you ask for a raise.

Long-term relationships are based on solidarity, trust and mutual respect. You as an employee are the customer that buys-in the need for profit of the company every day. The organization should buy in exchange your need: the need for money.

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The performance is created by adding a wage incentive plan. For an incentive plan to work, the employee must want more money and perceive some effects:

• Good performance leads to more pay and does not have negative consequences
• Their effort leads to improved performance
• See the other colleagues getting desired rewards based on the results of their good performance

The manager will have issues related to the wage incentive plan:

• Low quality – even if you have in place a system that monitors quality, the employee will find ways to increase productivity on the expense of quality.
• The access to resources – if a group of employees has access to resources at the expense of other groups, it will be perceived as an unfair advantage, decrease motivation and affect the work environment.
• Diminished cooperation – the tasks that are not related directly to production will be neglected
• Incompatibility – if a team is to large or an assembly line to complex is difficult to define the individual contribution
• Productivity restriction – the employees will have an interest in define a limited work output for a workday, in the interest of transferring a part of the real work output under the incentive plan

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Categories:

• Achievement (n Ach) with the following characteristics:
  • A preference for situations in which you can take personal responsibility for the result
  • A tendency to take calculated risks by setting moderately difficult goals
  • A desire to receive feedback for performance
• Affiliation (n Aff) – the desire to build and maintain interpersonal relations
• Power (n Pow) – the desire to influence others

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• Acceptance – the need for approval
• Curiosity – the need to think
• Eating – the need for food
• Family – the need to raise children
• Honor – the need to be loyal to a moral code
• Idealism – the need for social justice
• Independence – the need for individuality or autonomy
• Order – the need for organized, stable, predictable environments
• Physical exercise – the need to exercise muscles
• Power – the need for influence of will
• Romance – the need for sex and courtship
• Saving - the need to collect
• Social contact – the need for friends (peer relationships)
• Status – the need for social standing/importance
• Tranquility – the need to be safe
• Vengeance – the need to get even

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Equity theory is a process theory that states that motivation comes from what you get for what you give with a twist: what the other one gets is much more and always exactly what you should get.

According to this theory, inequity is unpleasant and people will consume a lot of energy to reach a balance.

There a number of assumptions in Equity Theory that applies to business:

• Equity norm – an employee expects a fair return for its contribution to his job.
• Social comparison – an employee will define what is his equitable return in comparison with what his peers in the company or in other companies get.
• Cognitive distortion – the employee will perceptually distort his own inputs and outcomes or choose another benchmark.
• I am out of here – the employee will leave the relationship because the exchange is highly inequitable.

Inputs typically include:

• Effort
• Loyalty
• Hard Work
• Commitment
• Skill
• Ability
• Adaptability
• Flexibility
• Tolerance
• Determination
• Enthusiasm
• Trust in superiors
• Support of colleagues
• Personal sacrifice, etc

Outputs typically include:

• Financial rewards (salary, benefits, perks, etc.)
• Intangibles that typically include:
  • Recognition
  • Reputation
  • Responsibility
  • Sense of Achievement
  • Praise
  • Stimulus
  • Sense of Advancement/Growth
  • Job Security

The problem that any manager has is that his employees will think they are underpaid as soon as they have a benchmark. He has no control over what the employee will decide that are relevant inputs, results, or peers. But he can control his message because it is directly linked to employee morale, efficiency, productivity, and turnover rate.

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Edwin Locke – Goal Setting Theory states that clear goals and appropriate feedback is a powerful motivation tool for your employees.

Characteristics of a goal:

• Clarity
• Challenge
• Commitment
• Feedback
• Task complexity

For all these characteristics to define a goal in terms of SMARTER – Specific, Measurable, Acceptable, Realistic, Time based, Exciting, Rewarding – should do the trick.

A manager can do a good job by focusing on improving goal commitment through creating a team spirit, establishing additional rewards (not necessary money), and by providing support.

Also learning the  difference between learning goals and performance goals can prove useful because employees define themselves based on the competencies they have and develop, and how these competencies can be useful in a different role.

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Motivation has two components: internal needs (intrinsic motivation) and external objects (extrinsic motivation).

Extrinsic motivation comes from external rewards (including besides money other benefits that can satisfy your inner needs) and feedback when you are treated as a human being. In the case in which you are a “very important resource”, motivation will come from getting paid, punishment if you break something and critics.

Intrinsic motivation is represented by internal forces that energize and direct you towards your goals. The inner needs do not address only your work environment, but your purpose of living. Therefore there is not always a good fit between what your job requires from you and what you really need.

Most of the studies emphasize that money are not the most important motivational factor. It is ridiculous. While for the company is all about the profit … because it’s business … for you it should also be about the money! Your intrinsic motivation should make you better in negotiation because nobody cares about what you want and the company will try to pay you the lowest amount that you will accept. There is nothing wrong with their attitude but is definitely something wrong with yours if you buy into the crap and settle for less than you think you deserve.

Maybe, just maybe, you will realize in the end a deeper truth: you will never make good money working for other people.

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