Topic 8 - Performance-based Pay: Motivational Foundations

Question 1

What is employee motivation?

Answer 1

Employee motivation is an employee’s intrinsic enthusiasm and drive to accomplish activities related to work, driven by an internal decision to take action.

Question 2

Why do organizations use performance-based pay systems?

Answer 2

To provide incentives for behaviors and outcomes that enable higher performance.

Question 3

What determines the success of performance-based pay systems?

Answer 3

How well the system aligns with employees’ motivation.

Question 4

What are the five most applicable theories of motivation for performance-based pay systems?

Answer 4

Maslow’s hierarchy of needs, McClelland’s theory of learned needs, Herzberg’s hygiene-motivator theory, self-determination theory, and expectancy theory.

Question 5

Does the word “theory” in motivation theories imply guesswork?

Answer 5

No, these theories are supported by substantial evidence and help managers design effective reward systems.

Question 6

What is Maslow’s Hierarchy of Needs Theory?

Answer 6

A theory stating that everyone has five universal needs ordered in a hierarchy, from basic survival needs to self-actualization

Question 7

What are the five levels in Maslow’s hierarchy of needs?

Answer 7

Physiological needs, safety and security needs, social needs, ego and esteem needs, and self-actualization needs.

Question 8

What are physiological needs according to Maslow?

Answer 8

Needs necessary for survival, such as food, water, oxygen, sleep, sex, and sensory satisfaction.

Question 9

What are safety and security needs in Maslow’s theory?

Answer 9

A desire for stability, security, protection, freedom from fear, and a need for structure and order.

Question 10

What are social needs in Maslow’s hierarchy?

Answer 10

The need for emotional love, friendship, and affectionate relationships with others, including family and friends.

Question 11

What are ego and esteem needs in Maslow’s hierarchy?

Answer 11

The desire for self-respect, self-esteem, and recognition or esteem from others.

Question 12

What is self-actualization in Maslow’s hierarchy of needs?

Answer 12

The need for self-realization, continuous self-development, and achieving one’s full potential.

Question 13

What is the principle of prepotency in Maslow’s theory?

Answer 13

Higher-level needs only become important and influence behavior once lower-level needs are satisfied.

Question 14

How does Maslow’s hierarchy relate to motivation in the workplace?

Answer 14

Employees are motivated to achieve needs in sequence, starting with basic needs and progressing to self-actualization, which can inform the design of rewards systems.

Question 15

Why is money significant in motivation theories?

Answer 15

Money impacts motivation across various theories, but its effects can vary and sometimes contradict depending on the theory.

Question 16

In order to design effective performance-based pay systems, managers must have a good understanding of __________________.

Employee motivation
Employee metrics
Employee merit
Employee management

Answer 16

Employee motivation

Question 17

The primary reason that organizations use performance-based pay is to:

Provide an incentive for the types of behaviors and outcomes that enable higher performance
Provide an incentive for standing out in a low-performing market
Provide an incentive for standing out in a high-performing economy
None of the above

Answer 17

Provide an incentive for the types of behaviors and outcomes that enable higher performance

Question 18

What is the core assumption of the Reinforcement Theory of motivation?

Answer 18

Behavior is a function of its consequences.

Question 19

What does the Reinforcement Principle state?

Answer 19

Positive consequences (rewards) increase the likelihood of a behavior recurring, while negative consequences (punishments) decrease it.

Question 20

How does the Timing Principle influence behavior in the workplace?

Answer 20

The smaller the time gap between the behavior and the reward or punishment, the greater the impact on behavior.

Question 21

What is an example of the Timing Principle in action?

Answer 21

Handing an employee a reward immediately after hard work has a stronger motivational impact than giving it months later during a review.

Question 22

What does the Variability Principle suggest about reinforcing behaviors?

Answer 22

New behaviors are acquired faster when rewards are given every time (low variability), but behaviors persist longer when rewards are given intermittently (high variability).

Question 23

How should rewards be managed according to the Variability Principle during a system rollout?

Answer 23

Rewards should be more frequent at the beginning and transition to variable over time.

Question 24

Why is it important to design reward systems with careful consideration of consequences?

Answer 24

Consequences directly influence the likelihood of future performance-related behaviors at work.

Question 25

What is intermittent reinforcement, and why is it effective?

Answer 25

Intermittent reinforcement involves rewarding behaviors variably, which makes behaviors more persistent even after rewards stop.

Question 26

The reinforcement theory is:

Behavior follows consequences
Consequences predict behavior
Behavior predicts consequences
Consequences follow behavior

Answer 26

Behavior follows consequences

Question 27

The timing principle specifies that:

The larger the time gap between the behavior and the reward or punishment, the smaller the impact on behavior
The smaller the time gap between the behavior and the reward or punishment, the smaller the impact on behavior
The smaller the time gap between the behavior and the reward or punishment, the larger the impact on behavior.
The larger the time gap between the behavior and the reward or punishment, the larger the impact on behavior

Answer 27

The smaller the time gap between the behavior and the reward or punishment, the larger the impact on behavior.

Question 28

The reinforcement principle states:

That when positive consequences follow a behavior, that behavior does not become more likely to be seen in the future
That when negative consequences follow a behavior, that behavior does not become more likely to be seen in the future
That when negative consequences follow a behavior, that behavior becomes more likely to be seen in the future
That when positive consequences follow a behavior, that behavior becomes more likely to be seen in the future

Answer 28

That when positive consequences follow a behavior, that behavior becomes more likely to be seen in the future

Question 29

What is Expectancy Theory?

Answer 29

A cognitive model of motivation that explains how individuals decide what to do by evaluating the outcomes and probabilities associated with them.

Question 30

What philosophical principle is Expectancy Theory rooted in?

Answer 30

Hedonism, as proposed by English utilitarians like Jeremy Bentham and John Stuart Mill.

Question 31

Who presented the first systematic formulation of Expectancy Theory?

Answer 31

Victor Vroom in his book Work and Motivation.

Question 32

What are the three key determinants of effort in Expectancy Theory?

Answer 32

Expectancy (effort-performance relationship), Instrumentality (performance-reward relationship), and Valence (value of the reward).

Question 33

What question does the Expectancy Perception address?

Answer 33

“Can I perform at the level required for the reward?”

Question 34

What influences an employee’s Expectancy Perception?

Answer 34

The clarity of performance expectations and their confidence in their abilities.

Question 35

What question does the Instrumentality Perception address?

Answer 35

“If I perform, will I receive the reward?”

Question 36

How can managers strengthen employees’ Instrumentality Perception?

Answer 36

By ensuring rewards are fairly distributed and by building trust in the performance evaluation process.

Question 37

What question does the Valence Perception address?

Answer 37

“Do I value the reward?”

Question 38

What determines the Valence Perception?

Answer 38

Employees’ personal value systems and individual circumstances.

Question 39

What happens if the answer to any of the three perceptions in Expectancy Theory is negative?

Answer 39

Employee motivation will significantly decrease.

Question 40

How does Expectancy Theory build upon Reinforcement Theory?

Answer 40

It considers not only the contingency of rewards but also the employee’s value of the reward and belief in their ability to achieve it.

Question 41

What is the Law of Unintended Consequences in relation to reward systems?

Answer 41

It states that not all consequences of a reward system change are foreseeable and may lead to unintended behaviors.

Question 42

What unplanned consequence might arise from high performance in a reward system?

Answer 42

High-performing employees may experience social consequences, such as being shunned by peers.

Question 43

Why is it important for managers to understand employees’ Valence Perception?

Answer 43

Because what management values may not align with what employees find rewarding.

Question 44

What happens when employees perceive they are not capable of meeting performance expectations?

Answer 44

Their motivation decreases due to low Expectancy Perception.

Question 45

Why is trust in management critical for Instrumentality Perception?

Answer 45

Employees need to believe their performance is fairly recognized and rewarded.

Question 46

What should managers consider when implementing reward systems to avoid unintended consequences?

Answer 46

The potential for rewards to motivate undesirable behaviors alongside the desired outcomes.

Question 47

Motivation results in three specifics. These include all except:

Valance
Instrumentality
Expectancy
Theory

Answer 47

Theory

Motivation results from employees having three specific perceptions: Expectancy, Instrumentality, and Valence.

Question 48

The valance perception asks:

If I perform, will I receive the reward?
Can I perform at the level required for the reward?
How long will it take to receive the reward?
Do I value the reward?

Answer 48

Do I value the reward?

Question 49

The expectancy perception asks:

If I perform, will I receive the reward?
Do I value the reward?
How long will it take to receive the reward?
Can I perform at the level required for the reward?

Answer 49

Can I perform at the level required for the reward?

Question 50

The instrumentality perception asks:

Can I perform at the level required for the reward?
How long will it take to receive the reward?
Do I value the reward?
If I perform, will I receive the reward?

Answer 50

If I perform, will I receive the reward?

Question 51

The law of unintended consequences states:

Many of the consequences of a reward system can be predicted
All of the consequences of a reward system can be predicted
It is impossible to predict consequences of a reward system
Not all of the consequences of a reward system change are foreseeable

Answer 51

Not all of the consequences of a reward system change are foreseeable

Question 52

What is Tournament Theory?

Answer 52

A theory stating that people are highly motivated to pursue extremely valuable rewards, even when the probability of receiving the reward is small.

Question 53

How does Tournament Theory relate to Expectancy Theory?

Answer 53

When Valence (value of the reward) is very high, Expectancy and Instrumentality become less significant in driving motivation.

Question 54

Why are large differences in pay between grades or high-potential bonuses effective?

Answer 54

They create a high degree of motivation, even when the odds of receiving the reward are small.

Question 55

Why is it important for some employees to visibly receive low-probability rewards?

Answer 55

To maintain high Instrumentality perceptions and ensure employees believe rewards are achievable.

Question 56

How does Tournament Theory explain behaviors like buying lottery tickets?

Answer 56

The magnitude of the reward overwhelms the perception of small odds, making the potential outcome highly motivating.

Question 57

The ________ states that people are highly motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite small.

Intrinsic motivation theory
Reinforcement theory
Tournament theory
Justice (equity) theory

Answer 57

Tournament theory

Question 58

True or False. The tournament theory suggests the magnitude of the reward overwhelms the perception of small odds.

Answer 58

True

Question 59

The tournament theory states:

People are highly motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite small
People are less motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite large
People are less motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite small
People are highly motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite large

Answer 59

People are highly motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite small

Question 60

Using expectancy theory terms, when valence is high, then expectancy and instrumentality matter _____________.

Less
None of the above
About the same
More

Answer 60

Less

Question 61

True or False. The expectancy theory describes why people would play the lottery, even if the chances are 1 in 150 million.

Answer 61

False

Tournament theory explains the reason

Question 62

The magnitude of the reward overwhelms the perception of __________ odds.

Large
Minimum
Small
Maximum

Answer 62

Small

Simply stated, the magnitude of the reward overwhelms the perception of small odds.

Question 63

It is essential that some employees are seen receiving the _______________ award to ensure that instrumentality perceptions remain sufficiently high.

Low-probability
Rewards
High-probablility
None of the above

Answer 63

Low-probability

Question 64

What is Justice Theory in the context of motivation?

Answer 64

A theory that highlights the human need for justice in social exchanges, where individuals are motivated to achieve a sense of equity and take steps to change situations perceived as inequitable.

Question 65

What are the three types of justice relevant for reward system design?

Answer 65

Distributive Justice, Procedural Justice, and Interactional Justice.

Question 66

What does Distributive Justice focus on?

Answer 66

The fairness of the distribution of rewards in relation to employees’ inputs compared to others’ inputs and rewards.

Question 67

How does low Distributive Justice affect employee behavior?

Answer 67

Employees may reduce their inputs, seek higher rewards, or leave the organization to restore perceived equity.

Question 68

Why is it important to have Internal Reward Alignment and External Reward Positioning?

Answer 68

To address the variety of comparisons employees may use, such as peers, family members, or market standards, when judging Distributive Justice.

Question 69

What does Procedural Justice emphasize?

Answer 69

The fairness of the process by which reward distribution decisions are made

Question 70

How can organizations enhance Procedural Justice?

Answer 70

By providing employees with a Voice in decisions, giving an Explanation for decisions, using Multiple Sources of information, and implementing a Correcting Mechanism.

Question 71

Why is Procedural Justice particularly important when Distributive Justice is low?

Answer 71

A fair process can reduce negative reactions to perceived inequities in reward distribution.

Question 72

What is Interactional Justice?

Answer 72

The perception of whether employees are treated with due respect and professionalism in pay-related interactions.

Question 73

How can low Interactional Justice perceptions arise?

Answer 73

When managers fail to show respect, empathy, or allow employees to save face during pay-related interactions.

Question 74

What is an example of low Interactional Justice?

Answer 74

Publicly mocking an employee for failing a certification exam.

Question 75

How does employee Voice impact Procedural Justice?

Answer 75

Allowing input into compensation design and personal reward decisions increases perceptions of procedural fairness.

Question 76

Why should organizations use Multiple Sources of information in evaluations?

Answer 76

To ensure fairness by incorporating diverse perspectives, including input from non-management peers.

Question 77

What is the purpose of a Correcting Mechanism in reward systems?

Answer 77

To address and fix mistakes in the reward distribution process, enhancing Procedural Justice.

Question 78

Why is providing an Explanation for reward decisions important?

Answer 78

It helps employees understand how decisions were made, increasing their perception of procedural fairness.

Question 79

Procedural justice can be defined as:

The process by which the reward distribution was determined
The process by which the reward distribution was carried out
The process by which the reward distribution was created
None of the above

Answer 79

The process by which the reward distribution was determined

Question 80

Which of the following will not enhance procedural justice?

Multiple sources
Device strategy
Correcting mechanism
Explanation
Voice

Answer 80

Device strategy

Question 81

Interactional justice refers to:

Perceptions of the extent to which the families of employees are treated with due respect
Perceptions of the extent to which the employee was treated with due respect
Perceptions of the extent to which the customers were treated with due respect
Perceptions of the extent to which the management are treated with due respect

Answer 81

Perceptions of the extent to which the employee was treated with due respect

Question 82

A correcting mechanism is:

In place to fix hardware in the organization
In place to fix misinformation between employees
in place to fix any mistake made by the system
None of the above

Answer 82

in place to fix any mistake made by the system

Every system needs a correcting mechanism in place to fix any mistake it makes.

Question 83

Which item can job evaluation, job analysis, market surveys, and performance measurement assist with?

Voice
Correcting mechanism
Multiple sources
Explanation

Answer 83

Explanation

The systematic processes of job evaluation, job analysis, market surveys, and performance measurement are important because they provide managers with the explanation of how a system was designed and a decision was made.

Question 84

What does Intrinsic Motivation Theory (Self-determination Theory) focus on?

Answer 84

It focuses on how employees attribute their behavior to either intrinsic (self-chosen) or extrinsic (imposed) causes, which impacts their attitudes and motivation.

Question 85

How does a contingent bonus reward system affect motivation according to Intrinsic Motivation Theory?

Answer 85

Employees may attribute their efforts to the presence of the bonus rather than intrinsic enjoyment, leading to reduced motivation if the bonus is removed.

Question 86

What are Intangible Rewards, and how do they relate to Intrinsic Motivation Theory?

Answer 86

Intangible Rewards, such as recognition, meaning, and culture, go beyond pay and significantly influence employee motivation and performance.

Question 87

Why should managers design pay systems with intrinsic motivation in mind?

Answer 87

To ensure motivation is not overly reliant on external rewards, which may diminish if those rewards are removed.

Question 88

What broader perspective should managers adopt according to Intrinsic Motivation Theory?

Answer 88

Managers should embrace a Total Rewards perspective that includes both tangible (e.g., pay) and intangible rewards to sustain motivation.

Question 89

True or False. Employees attribute their own behavior to being self-chosen (intrinsic) or imposed (extrinsic), and that attribution has implications for their attitudes and their motivation when the external factors are reduced.

Answer 89

True

Question 90

Which of the following is not an example of an intangible reward?

Base salary
Culture
Meaning
Recognition

Answer 90

Base salary

Intangible rewards such as recognition, meaning, and culture play a large part in employee motivation and performance.

Question 91

What is a Job Performance Model, and why is it important?

Answer 91

A Job Performance Model defines performance and outlines its causes, helping managers design reward systems aligned with specific roles and organizational goals.

Question 92

How does a Job Performance Model influence employee engagement and motivation?

Answer 92

When job performance is influenced more by factors outside employees’ control (e.g., funding constraints), motivation and engagement may have a smaller impact on performance.

Question 93

Why is it important to consider employee Motivational Preferences in reward systems?

Answer 93

Different employees are motivated by different rewards (e.g., cash bonuses vs. time off), so flexible and customizable systems are more likely to engage the workforce effectively.

Question 94

What is an example of how motivational preferences can vary between employees?

Answer 94

One employee may value a cash bonus for financial goals, while another may prefer additional time off for personal fulfillment.

Question 95

What is Motivational Judgment, and why is it significant?

Answer 95

Motivational Judgment involves understanding when different motivational theories are compatible or conflicting, helping managers make informed decisions about reward system design.

Question 96

How do reinforcement and expectancy theory align in designing reward systems?

Answer 96

Both recommend making pay contingencies clear to enhance motivation.

Question 97

How does Intrinsic Motivation Theory conflict with reinforcement and expectancy theories?

Answer 97

Intrinsic Motivation Theory suggests that clear pay contingencies can undermine intrinsic reasons for working, creating a potential conflict in reward design.

Question 98

Why must managers balance tradeoffs in reward system design?

Answer 98

Balancing tradeoffs ensures the system supports strategic goals while considering the complexities and potential conflicts between motivational theories.

Question 99

Why should managers have strategic reasons and supporting data for reward system methods?

Answer 99

Strategic reasons and data ensure that the chosen methods are effective, evidence-based, and aligned with organizational goals.

Question 100

What role do tangible and intangible rewards play in motivation?

Answer 100

Both tangible (e.g., bonuses) and intangible (e.g., recognition) rewards contribute to creating an engaging and motivating work environment.

Question 101

________________ and ___________ theory would both recommend that contingencies in pay be made very clear.

Enforcement and expectancy
Reinforcement and expected
Reinforcement and expectancy
None of the above

Answer 101

Reinforcement and expectancy

Question 102

True or False. Intrinsic motivation would suggest that the clear contingencies in pay serve to undermine employees’ intrinsic reasons for working.

Answer 102

True

Question 103

True or False. Reinforcement and expectancy theory would both recommend that contingencies in pay be made very clear.

Answer 103

True

Question 104

Employees attribute their own behavior to being ______________ or ________________.

imposed; unavoidable
self-chosen; imposed
imposed; exposed
self-chosen; automatic

Answer 104

self-chosen; imposed

Intrinsic Motivation Theory (also referred to as Self-determination Theory) stipulates that employees attribute their behavior to internal and external causes.

Question 105

Intangible rewards include all except:

Paid time off
Meaning
Recognition
Culture

Answer 105

Paid time off

Intangible rewards such as recognition, meaning, and culture that play a large part in employee motivation and performance.

Question 106

Interactional justice perceptions grow out of whether or not managers and other personnel show _________________________ to employees in their pay-related interactions.

Kindness and respect
Admiration and respect
Professionalism and respect
Professionalism and love

Answer 106

Professionalism and respect

For example, publicly announcing with laughter that an employee did not pass a certification exam would lead to low interactional justice perceptions.

Question 107

True or False. Every reward system should be reviewed to ensure that there are policies in place to address each driver of procedural justice.

Answer 107

True

Question 108

When employees have a ___________ in the design of the compensation system they are more likely to see the system as procedurally fair.

Thought
Voice
Memory
Idea

Answer 108

Voice

When employees have a Voice in the design of the compensation system and in the process by which their personal rewards are determined, they are more likely to see the system as procedurally fair.

Question 109

Employees should always be provided an ___________ for the reward decision.

Evaporation
Evaluation
Evacuation
Explanation

Answer 109

Explanation

The systematic process of job evaluation, job analysis, market surveys, and performance measurement are important because they provide managers with the explanation of how a system was designed and a decision was made.

Question 110

True or False. The primary reasons that organizations use performance-based pay is to provide an incentive for the types of behaviors and outcomes that enable higher performance.

Answer 110

True

Whether or not those incentives actually produce the desired results depends, in part, upon how well the performance-based system squares with how employees are motivated.

Question 111

It is important that multiple people had input into the process. This can be done through all except:

Government mandates
Market prices established
Performance assessed
Competencies rated

Answer 111

Government mandates

Multiple sources of information should be used whenever possible.

Question 112

When distributive justice is low, procedural justice receives a lot of_________________.

Managerial attention
Psychological attention
Employee attention
None of the above

Answer 112

Employee attention

Question 113

Distributive justice perceptions are based upon __________ views of the distribution of rewards in the organization.

Customers’
Employees’
Governments’
Employers’

Answer 113

Employees’

Distributive justice perceptions are based upon employees’ views of the distribution of rewards in the organization.

Question 114

Distributive justice is also known as the:

Grace theory
Equity theory
Quantity theory
Equality theory

Answer 114

Equity theory

It is also known as equity theory, and is based on comparisons between the ratio of employees’ inputs and rewards to the ratio of inputs and rewards of others.

Question 115

When low distributive justice occurs, which of the following changes will employees not make?

Seeking higher rewards
Leaving the organization
Changing inputs
Earning lower rewards

Answer 115

Earning lower rewards

Employees perceiving low distributive justice take action to bring balance to the comparisons by changing their inputs, seeking higher rewards, or leaving the organization for a more equitable distribution.

Question 116

True or False. It is not important to have both the internal reward alignment process and the external reward alignment process in place.

Answer 116

False

Question 117

Employees will compare their rewards to those both __________ and ___________ to the organization.

Aligned, misaligned
Functioned, malfunctioned
Internal, external
None of the above

Answer 117

Internal, external

Employees will compare their rewards to those both internal and external to the organization.

Question 118

True or False. Human beings have an inherent need for justice in social exchanges.

Answer 118

True

Question 119

Justice theory has three types of justice. Which is not included?

Distributive
Interactional
Interchangeable
Procedural

Answer 119

Interchangeable

Question 120

This theory explains why people purchase lottery tickets:

Reinforcement theory
Tournament theory
Justice theory
Expectancy theory

Answer 120

Tournament theory

Simply stated, the magnitude of the reward overwhelms the perception of small odds.

Question 121

The Law of Unintended Consequences can appear in the:
Tournament theory
Reinforcement theory
Expectancy theory
Justice theory

Answer 121

Expectancy theory

This principle states that not all of the consequences of a reward system change are foreseeable.