Figure 1: Expectancy Theory (Cowling and Mailer, 1983)
Evidence suggests that performance related pay schemes do not motivate employees, and workers find them to be rather divisive. Most academic research shows that such schemes, overall, tend to have a demotivational rather than motivational effect. As mentioned above, Maslow’s hierarchy of needs theory (See Figure 2) states that people will be motivated by pay, as it is money that satisfies their most fundamental needs. However, Maslow theory also states that there are different types of needs and people need more then money; they have other needs as well, such as respect, recognition, and status. Job satisfaction also depends on the social relationships and general atmosphere in the firm, if these are appealing to the workers, and then pay might not make such a huge difference (Redman and Wilkinson, 2001).
A number of organisations have had trouble in setting performance criteria, assessing performance objectively and in linking pay to performance, particularly where budget constraints limit the potential size of any reward (Cowling and Mailer, 1983). If performance criteria are not discussed with the employees but are set and enforced by management, then this might lead to workers being demotivated. This is argued by Locke’s Goal theory, which states “motivation follows from the definition of appropriate work goals and engaging employee commitment to those goals” (Locke 1983). Therefore, appraisal system may demotivate workers if performance criteria set by the management without consulting the workers. However, if employees are consulted but the goals set are perceived to be unachievable by some, then that would also lead to demotivation, as the employees would feel that they are under pressure and the system is unfair which would lead to further demotivation (See Equity Theory below)
Workers have expectations about the outcome of the effort that they put into their work. Vroom’s expectancy theory states that motivation is dependent upon desire for something and the expectation that it is achievable. Therefore, according to the expectancy theory, workers will not be motivated to work hard if they do not obtain a favourable performance appraisal, which does not lead to an increase in their rewards. The rest of this essay looks at ways how appraisal systems may lead to employer dissatisfaction.
The reason why appraisal systems demotivate workers is argued by the equity theory, which considers worker’s perceptions of the fairness of work (See figure 3).
Figure 3: Inequity theory
A reason why workers may feel that they may be treated unfairly is because, as Herzburg argues that employees are more likely to be motivated by factors such as achievement and the work itself rather then simply money. Performance related pay schemes might demotivate workers if they feel that the rewards received do not meet the expected equitable level or the method in which the pay is determined is unfair. The former may not always be in the control of the employers, this might happen in a situation where they cannot give rewards to the employee because of external conditions. These include economic conditions, such as a recession or other conditions such as war. Although the worker will not blame the organisation if this occurs, they will still feel demotivated. However, if performance related pay systems did not exist in the organisation then this might not be an issue. One reason why employees might feel that they are being treated unjustly is if they believe that the appraiser is not putting sufficient effort in their task and therefore, the employee might feel that the outcome of the appraisal will not be a true reflection of the effort that they are putting into work. Another reason why the employees might feel that they are not being appraised in a fair and just manner again depends on the employee’s perception of the appraiser. They might feel that for some reason (that) the appraiser does not like them or that they are more favourable towards another employee, which would lead to unfair distribution of rewards. This would demotivate and disheartened them, as they would believe that there is no reason for them to improve their performance and put an extra effort into work if they are not properly and fairly rewarded. These feelings of disrespect produce strong negative feelings and may continue for a long time. Another reason why workers might feel unfair due to performance related pay is because they feel that managers are imposing objectives on them, and they do not have any say or input in the matter. This leads to feelings of unworthiness and therefore, employees might feel demotivated (Redman and Wilkinson, 2001).
The degree to which the worker is demotivated depends largely on what the appraisal system measures. If the measurements are mostly subjective and depend on the appraiser, then the worker might have more reasons to be demotivated, as mentioned above. Subjective measurements include employee personal traits that cannot be based on facts, such as worker loyalty and dependability or how well he interacts with the supervisor and colleagues. However, if appraisals measure traits based on evidence, such as attendance records and sales made in a specific period of time, then the employee would have less reason to feel that they are being discriminated against, as they have the facts in front of them. In conclusion, performance related pay schemes do not largely motivate workers as the evidence above illustrates. However, it can be argued that the problems with performance related pay might be avoided if the payment method is not based on individual performance but on group performance. An example of this type of scheme is, profit related pay where workers are paid based on company profits. This scheme would not lead to feelings of unfairness or demotivation, especially if all workers are treated equally.
In conclusion, if all the conditions that result in motivation through performance related pay are met such as employee consensus and their ability to actually achieve the set targets and feeling that the appraiser on their side then they will motivated. However, in the real business environment, it is difficult to keep everyone satisfied and the targets set by managers may not be realistic because they have pressures on them to achieve high standards. Therefore, as the agency theory started there is a conflict of interest between management objectives and what the employees wants to achieve.
REFERENCES
Cowling, A., et al. (1983) Managing Human Resources, Edward Arnold, London.
Redman, T., et al. (2001) Contemporary Human Resource Management: Text and Cases, Prentice Hall.
Locke, A., et al (1983) Goal Setting: A Motivational Technique That Works! Prentice Hall
www.52.homepage.villanova.edu/maureen.sullivan/coursematerial/L&M_Notes/JobPerformance.htm
www.psych.ucalgary.ca/CourseNotes/ w02/PSYC423/motivation.html
www.uncc.edu/rbooth/Management%20Prin/ Motivation%20-%2013.ppt
