Motivation In Practise

Question 1

5 FINANCIAL INCENTIVES

Answer 1

Piecework
Commission
Bonus  
Profit share
Performance-related pay

Question 2

What is piecework?

Answer 2

‘Output workers’ e.g. dressmakers paid by dress

Paying each member of staff a set amount of money each time they repeat a task

Question 3

2 Advantages of Piecework

Answer 3

Encourages speed as the quickest staff earn the most money

Home workers can start and finish when they want so work fits around a family

Question 4

Disadvantage of Piecework

Answer 4

Quality issues (staff rush to complete as many tasks as possible)

Question 5

Formula to calculate output

Answer 5

Pay per piece x number of pieces you complete

/ number of hrs worked

Question 6

What is commission?

Answer 6

Paying staff (whose role involves selling) a certain % of the revenue they generate, usually on top of a low basic salary or hourly rate
E.g. car sales person

Question 7

Advantage of commission

Answer 7

Incentivises staff to sell as much as they can

Question 8

Disadvantages of commission

Answer 8

It may lead to mis-selling as staff try to sell more expensive products or services to maximise their commission, causing customer dissatisfaction

Employees are selling rather than meeting needs of customers

Question 9

What is bonus?

Answer 9

Paying a lump sum as an additional reward to members of staff, typically once a year

Question 10

Advantage of a bonus

Answer 10

Offering staff a valued extra thank you

Question 11

Disadvantage of a bonus

Answer 11

Large bonuses can distort staff behaviour, emphasising the need to reach bonus targets by whatever means possible.

Question 12

What is profit-sharing?

Answer 12

Allocating a certain proportion of annual profits to be shared as a bonus among staff

Question 13

Advantages of profit-sharing

Answer 13

Aligns staff goals with business goals
Encourages teamwork
Employees will keep costs down (won’t overspend on a budget)
More loyalty

Question 14

Disadvantages of profit-sharing

Answer 14

Hard-working staff may resent others who receive the same profit share bonus without putting in the same amount of effort
Won’t motivate if company doesn’t make a profit

Question 15

What is performance-related pay?

Answer 15

This involves rewarding staff whose performance exceeds a certain level where work performance is hard to quantify. The decision whether to reward a bonus usually depends on some form of appraisal system

Question 16

Performance-related pay further explained

Answer 16

Manager decides a set of objectives employee must fulfil

Further appraisal will then determine how well they have done e.g. excellent= 10% bonus in pay

Question 17

Advantage of performance-related pay

Answer 17

Directly link employees performance with how much they are paid

Question 18

Disadvantages of performance-related pay

Answer 18

Employees may feel that the process used to decide on the award of PRP is unfair or biased against them
Causes jealousy and unrest