Topic: Corporate culture: the influence of motivation system

on activity of the enterprise

Completed by:

Kuatova Aigul

Almaty, 2011

Thesis: The pay increase is not a good motivation policy of enterprise

People differ not only in their ability to do, but also in their will to do, or motivation. The motivation of people depends on the strength of their motives. Motives are sometimes defined as needs, wants, drives, or impulses within the individual. The satisfaction of physiological needs (food, clothing etc.) is usually associated in our society with money. According to Maslow’s theory [2003], the hierarchy of needs assumes that people are motivated to satisfy 5 levels of needs (physiological, security, belongingness, esteem, self satisfaction): when needs at one level are satisfied, they are not longer motivators and the individuals “moves up” the hierarchy to satisfy needs at the next level. It is obvious that most people are not interested in dollars as such, but only as means to be used to satisfy other motives. Thus, it is what money can buy, not money itself, that satisfy one’s physiological needs.

There are the enterprises which management makes a faulty decision by the pay increase of its employees. Whereupon nothing were happening and the management is disappointed with it. In many cases, money can buy the satisfaction of physiological and safety needs and even social needs if, for example, it provides entry into a desired group, such as a country club. But as one becomes concerned about esteem, recognition, and eventually self actualization, money becomes a less appropriate tool and is, therefore, less effective.

In our research we can single out two important and abundant causes of the pay increase like not a good motivation policy of enterprise: very expensive and not efficient!

I. Very expensive:

1. A deviation by budget performance

As we mentioned earlier, money and its increase is very complicated motive that is entangled in such a way with all kinds of needs.

Accounting of any enterprise provides a powerful and important basis for its motivation system. The accounting information and “support” should help managers motivate employees to perform their tasks and obligations efficiently. A special role in realizing the motivation system belongs to management accounting, which with its budget and performance statements has a great impact upon the motivation of employees in an enterprise. The running to an extreme by accounting planning (business objectives definition, way and means for achieving the objectives, definition of possible alternatives, and definition of risk management) related to pay increase process challenges the deviation by budget performance.

2. A “conflict” between items of expenses and revenue of budget

If the manager wants to increase money’s power as a motivator, it should be implement an incentive plan. But he should remember that the increase of employees’ payment expenses can challenge “conflict” between items of expenses and revenue of enterprise’s budget. So the management accounting is the important part in management process. It helps managers plan, organize and control achievement of set objectives. The motivation aspect of management accounting is primarily included in providing information basis for success estimation, according to current motivation and compensation system, but also in defining the basis and measures of employee stimulation.

II. Not efficient and not effective

1. A lot of employee’s ambitions

The cause of not good motivation policy can be a “deviant” behavior of employee. Unfortunately, we can show often the influence of pay increase on onset of employee’s ambitions. As P.Hersey [2000] said, “our behavior is generally motivated be a desire to attain some specific result” [3]. The majority of managers could be assured that as the pay increase of employee’s is more and often the efficiency of its job is less productive. Organizational culture may spark ambition, or the personal need to excel and achieve, among all employees at varying levels. So, it should be typically demonstrated by an employee's desire to contribute to the organization as well as the desire for constant learning and advancement.

2. A possibility of social disorganization

Our hypothesis is that employees who characterize their workplace as disorganized in terms of productivity, adequate equipment, and supervision will have weaker social ties with coworkers and supervisors than employees who characterize their workplace as organized. Further, also we hypothesize that “bad” workplace will influence this relationship. Individuals who have been victimized in their workplace will be more likely to have weaker social ties with coworkers and management and characterize their workplace as disorganized. By my opinion, another reason why people suffer from disorganization is because their emotional and social lives are cluttered. The psychological feeling of being overwhelmed can lead to a disorganized life. In these cases time management and acknowledging priorities are two possible cures for eliminating disorganization.

So the mentioned factors should be provided by management of enterprise for every eventuality. Organization places a person in a more productive environment that is conducive to enhancing his quality of life.

3. A possibility of personnel hemorrhage

The pay increase is not efficient because it could challenge a personnel hemorrhage (wastage) in enterprise also. We can show this effect of motivation policy in modern IT-companies often which have a lot of young specialists, competent, creative and ambitious. They are in search of work often, of highly paid job. If the management of enterprise will increase the pay of such kind of specialists the motivation policy will burst in several time. This category of employees should be motivated by other types of pay increase, which approaches are suggested by us in the following paragraph.

IV. Because of the cost and inefficiency the management of enterprise should develop different types of pay increase

So, each person is motivated by different things. No one person has exactly the same mixture or strength of these needs as another. Some people are driven mainly by achievement, others are concerned primarily with security etc. Although the management of enterprise must recognize individual differences, and, may be, the managers can not presume to decide which motives are most important to their employees. It should be find this out by asking them, listening to them and observing them. By G.T.Milkovich [1999], managers may influence motivation through different types of pay increase for example through the organization’s reward system which can affect individual attitudes, behaviors, and motivation. Edward Lawler [1990] described four popular incentive systems include profit sharing, gain sharing, lump-sum bonuses, and pay for knowledge. Many enterprises and organizations are experimented with various kinds of incentive systems, which attempt to reward employees in proportion to their accomplishments.

In addition we propose to use other tools of enhancing of motivation policy like:

ü Support by improvement of (professional) skills,

ü Good working conditions, working atmosphere and personal relations on workplace

ü Full appreciation for work done

ü Management loyalty to employees

ü Promotion and growth with enterprise

ü Participation in decision-making and collective negotiations.

Therefore, by bringing employee’s perceptions closer and closer to reality managers often can increase their effectiveness. As the practice proved the listed conditions are more efficiency than the pay increase.

Bibliography

1. Edward E.Lawler III. Strategic pay. Jossey – Bass Publishers, 1990.

2. George T.Milkovich, Jerry M.Newnan, Carolyn Milkovich. Compensation. Irwin/Mc Graw-Hill, 1999.

3. Hersey, Paul. Management of organizational behavior: leading human resources/Paul Hersey, Kenneth H.Blanchard, dewey E.Jonson, 8^th ed., 2000.

4. Маслоу А. Мотивация и личность. 3^е изд., М.Питер. 2003. 352с.