INTRODUCTION

To keep a productive workforce that is eager to accomplish key corporate goals,

organizations require motivated workers. Motivation is described as "a collection of
energetic forces that originate both within and outside of an individual's being to initiate
behavior related to their work and determine its form, direction, intensity, and duration"
(Pinder, 1984).
It is possible to influence motivation using rewards. Financial incentives are by no
means the only means of motivation; in fact, motivation is the goal of many HRM
practices. Although nonfinancial rewards are also crucial for guiding and forming
desired behaviors, the study on reward systems has expanded to include them (Chiang
and Birtch, 2007). Typically, reward systems are associated with the distribution of
compensation. A reward system is made up of the policies and regulations that
companies use to manage employee benefits, like yearly salary increases. A reward
system should satisfy the goals associated with the strategy of an organization, while at
the same time be attractive, cost effective, and fair. There are many variations possible,
as a mix of components that include fixed, variable, and indirect rewards. Within a
particular system, it is important to consider two aspects: First, the reward type, the
nature of the reward itself that may be financial or not, and fixed or contingent on a
certain criterion. Second, the reward criteria, the norms and principles on which rewards
are allocated, for example, individual or team performance. Criteria that are agreed on
and liked by employees in many countries in the world are performance (e.g., individual
output), job inputs (e.g., responsibility), and human capital (e.g., skills and knowledge)
(Chiang and Birtch, 2005).
In addition to enabling people to spend money on items they value, payment for
services rendered to the organization has additional significance (Thierry, 1992). In
particular, it gives details about the accomplishments, standing, and admiration of an
individual or group. The meaning of pay is of importance to the individual receiving the
pay, but is also interpreted by peer workers (Larkin et al., 2012, p. 1209) and others
within and beyond an organization. Within organizations, pay differentiation helps to
distinguish the appreciation of the efforts of an individual for the organization. When the
pay is contingent on performance, the different aspects of its meaning may become
more salient. When rewards are small, they may become meaningless. When they are
large, they may even motivate behaviors that are detrimental to the organization, as the
famous example of the rogue trader Nick Leeson demonstrated. If compensation is
deemed to be more valuable than what competitors are willing to offer, it may aid an
organization in its competition to draw and keep the expertise and skillful individuals it
needs. This mechanism, known as the sorting effect, is predicated on the idea that
specific people are drawn to particular businesses, and that highly qualified individuals
are drawn to the highest paying organizations.
 Lesson 1:
The Ability to Motivate

Learning Objectives:
1. Discuss the relationship between motivation and rewards.
2. Identify factors that can influence individual’s motivation levels.

The reward system and efficiency

Most organizations seek to optimize their return on investment and in order to do
that they need to be efficient. One way to improve the productivity is to optimize the
utilization of the organization’s human capital. In order to maintain the organizational
efficiency and productivity the managers and board members can use different steering
instruments to control the activities in the company. One of these steering instruments
available is the use of a reward system which purpose is to motivate the employees to
act in the best interest of the organization as well as to reach organizational goals.
John Stredwick states in his study that along with the changes in the business
markets the way employees are being rewarded is also changing. The companies need
to make sure that they stay in their competitive position with the help of a conscious
human resource management. The reward has a central role in the organizational
performance since it will support and help to fine tune the groundwork for success that
is the human capital. Organizations are highly dependent on their human capital and a
motivated staff can ensure the survival of the company. By using a reward system as a
steering instrument, the organizations can lead their employees to a wanted behavior.
Regina M. Clark means in her paper that there is previous research that indicates that
the motivation among the employees has a positive relationship with the productivity of
the organization. This indicates that human resource management has a possibility to
create many competitive advantages if the companies are able to manage it well and
motivate through the reward system. There are, hence, many reasons for why it is so
important for the organizations to motivate their employees in a sufficient way. When
this is done, it can create a win-win situation for both the employees as well as for the
company.

Motivation to work
Work motivation for the employees can be viewed through the lens of the rational
economic man model which gives an explanation to the relationship between behavior
and motivational characteristics. The model sees the human being as someone who
finds a reward as something that is desirable and can be obtained through the conduct
of a particular action or work. The model also states that the individuals will feel
motivated by the reward and therefore do the work as they have been told to. The
human being makes a rational comparison between the efforts he/she needs to provide
in order to obtain the reward. The model also states that the individuals strive for
maximum satisfaction through chasing more monetary rewards. Therefore, a reward,
and foremost a monetary reward, has a possibility to influence the employees to work in
a certain way. The way they work could potentially become more efficient if the
managers provide instruction for the right activity otherwise the employees might work
in the wrong directions.
A reward system does not have to consist only of monetary rewards; Wayne Turk
is one of many researchers that state in their studies that money is no longer the
number one motivation factor for employees. Monetary rewards can have a de-
motivating effect in some situations, for example individual monetary bonuses are not
appropriate for team work since individuals are keener on getting their personal
bonuses rather than performing good results with the team. As can be seen there are
different opinions about what motivates employees and even though money is often the
first thing that comes to one’s mind, it is still a question whether or not money is the
number one motivational factor that companies use today.

Rewarding to achieve goals

Even if numerous studies have showed that non-monetary rewards can be just
as effective in improving performance as the monetary rewards most of the focus has
been on the money. This can in some sense be explained by the rational economic man
where the human beings make their decisions based on financial rewards available to
them.
When a company is implementing a reward system it is crucial for the managers
to keep in mind that what motivates one employee might not motivate another employee
and that these motivation factors might change over time as people will enter new
stages of their life. Therefore, it is possible that money is a motivation factor for some
employees while other may seek other options as a motivational factor.
John Stredwick is one of the researchers that show in his study that it is
important that the rewards are aligned with the organizational goals in order to create
efficiency. Every organization has goals for the future and there are many different ways
for organizations to pursue the goals. The organization wants the employees to work in
their best interest in order for the organization to become more efficient and effective
and to gain competitive advantage. To get the employees to work towards the goals of
the organization a reward system is useful. By rewarding employees for their effort to
achieve the organizational goals the employees will be motivated to continue to work in
the best interest for the organization. However, to create a reward system that is
fulfilling its purpose is not easy. There are a number of aspects that have to be taken in
consideration by the managers in order for the reward system to be accepted by, on
one hand the managers, but it is just as important that it will be accepted by the
employees. One of the main obstacles is to recognize that every employee has
personal goals with the job and to combine them with the organizational goals is a
highly important but also difficult task for the managers. However, by overcoming this
obstacle and for the employees to reach their personal goals as part of the
organizational goals will be a tremendous motivational factor for the employees.
The discussion has showed that there is a connection between the reward and
the overall performance of the company. This is due to the human resources (HR)
within each company that has the ability to enhance their efficiency when motivated.
There are several strategies in how this HR management will take place; hence, they
will also have different impact on the performance of the employees.
 Lesson 2:
Rewards and Reward System

Learning Objectives:
1. Explain the role of reward system in an organization.
2. Describe the relationship between rewards and reward system.
3. Differentiate reward system from agency theory.

Reward, reward system, and salary

In the book “Employee Reward” by Michael Armstrong reward system is defined
by the World Work (2000) as the tools available and used by the employers in order to
attract, retain, motivate and satisfy their employees. The concept of reward system also
includes all investment made in the organizations human capital and everything that the
employees find attractive in the employment relationship.
A reward system is a combination of financial rewards as well as employee
benefit and these two elements combined together compose the total remuneration for
the employee. The total reward system also embodies non-financial rewards which also
includes performance management processes. An important aspect of this is that even
if a benefit regards increased health care in form of medical attention, as an example,
this will impose as a financial reward since it is linked to a cost for the organization.
A reward system is built around five main components that all include financial
rewards, benefits and non-financial rewards. There is a process of measuring and
evaluate the work of the individuals in order to decide the level of employee benefits
that need to be distributed. A reward system also needs a practice for motivating using
financial and non-financial rewards. These practices constitute of the financial reward in
form of payment, both base and variable, as well as employee benefits. It also includes
non-financial rewards that originate from the work itself and effective management. The
aim is to assemble these steps so that the organizations gather all of the competences
and recourses that lie among the employees. The reward system’s sole purpose is to
motivate the employees in order to maximize the efficiency of the organization by
creating a steering- and management instrument. The motivation is thought to rise from
the rewards ability to create a team spirit, a loyalty to the company and to increase the
employee’s knowledge of the company’s results. The reward system needs to balance
these processes in order to obtain joint goals for the organization by motivation. By
using the right rewards, the managers and the employers can stimulate the employees
to create job satisfaction and to act in a certain way. If the employees respond as
intended this can ultimately increase the organizational efficiency, hence, create
competitive advantages. The system also needs structure so that the level of reward
meets the value of the positions in the organization and schemes for providing the
individuals with financial rewards that meet their performance. It is also necessary to
create appropriate procedures in order to maintain the system so that the reward
system creates efficiency within the human capital.
The salary is part of the reward system as a financial reward that the employees
get as a reimbursement for a job accomplished. But the salary is often not considered to
be a reward since we take the basic pay for granted. Very few employees would
consider working for no money at all and the salary is therefore considered to be an
established right for the employee and therefore creates no extra stimulus. The salary is
merely compensation to the employee for providing a resource and the reward itself is
considered to be something extra outside the salary.

Agency theory and reward system

The agency theory shed light to the problem that can occur when the
organizational goal does not align with the individuals’ goal. The main theme in this
theory is that a principal, the employer, assigns work to the agent, the employee, who
thereby needs to perform the work. The theory is focusing on two main problems that
can occur between the agent and the principal and first there is the issue of conflicting
goals. There is also the principal problem of verification of the agent’s behavior and
there is a need for monitoring the performance to avoid this problem. Outside the
theoretical framework, in real life the principal has no direct control over the behavior of
the agent and there is no guarantee that the agent behave as the principal wants. In the
agency theory this phenomenon is referred to as the moral hazard problem. There is
also the problem with asymmetry in the risk taking between the agent and the principal.
This is something that occurs when the principal and the agent’s choice of action is not
congruent due to different preference of levels of risk, they are willing to take. The
reward system is built upon the notion that it, when properly structured, can move the
employee in a direction that is most preferable for the organization. This could be seen
as the effect of the control system or the reward system. Matsumura et al. are proposing
a new model to explain how the principal can use rewards to control the agent. They
mean that the outcome of the agent’s performance will be dependent on the size of the
reward. This is due to the fact that when working towards the goal set by the employer
or the principal the employee, the agent, will not only gain monetary rewards. The
employee will also gain nonmonetary rewards from the work itself. If the employee’s
interest in performing the work is conflicting with the interest of the principal, the
employee will gain a larger portion of nonmonetary reward by striving to fulfill his/her
own goal instead of the principal’s. It is due to the structure of the reward system that
determines if the employee will gain more from fulfilling the goals of the organization
than his/her own. With this in mind it becomes clear that the employers must create a
reward system that minimizes the risk of a moral hazard problem with the employee.
Lesson 3:
Motivation Theory and Human Needs

Learning Objectives:
1. Summarize the key content theory of motivation.
2. Understand the significance of human needs as a driving force for individuals.

Motivation in theory
Motivation, as a concept, can be divided into being either an intrinsic or extrinsic
motivation. The intrinsic motivation comes from inside the employee and is without any
obvious external incentives. An intrinsic motivation regards the work itself and
motivation comes from satisfaction from the actualization of the work procedure. The
intrinsic reward is based in the work and how the work procedure and its content are
laid out. An extrinsic motivation, on the other hand, is the external motivation that is
triggered by influences from the outside the employee. In order to stimulate an extrinsic
motivation within the employee the employer can use external rewards and incentives.
In the following sections we will discuss more in detail what motivation is and how the
managers and employers can create motivation by using a reward system.

Hierarchy of needs
The starting point in the creation of a motivation within the employees is based in
the needs of the individuals. The common denominating in the theories regarding the
needs assume that the process of creating motivation origin from an unsatisfied need.
The collected theories regarding the needs are called content theories of motivation and
all reflects upon the specific things inside the employee or the human that influences the
motivation.
A pioneering theory regarding motivation and needs of the human being was
developed by Maslow. He stated that there were some basic needs for the human being
that can be assembled in a hierarchic way. These needs are explained in the
individual’s perspective and not from the employers. Maslow hierarchy of needs is basis
for the reason that most of the theories regarding motivation are building upon the
theory created by Maslow.
At the bottom of the pyramid there are the physical needs and Maslow meant
that they were the foundation to motivation. These are the bodily needs that the
individual has such as food, water, sleep and shelter. If they are not satisfied other
possible needs in the hierarchy will not be seen as relevant. When the physical needs
are satisfied the need for safety arises. Maslow defines safety as the inner need of
feeling safe and protected. It also includes the need for structure and order as well as
the need of rules and regulations. Both the physical and safety needs are often
combined together as they indicate the need that we have to satisfy before we even
start to care about anything else. The safety that Maslow refers to is the overall safety in
the society and the structure of laws that over bridge all people living in the same
environment.

The need of self-actualization and self esteem

The third need that Maslow proposes is the need of belongingness where the
individual have the need to fit in and be loved. The employee might feel the need to
belong to a group and feel team spirit at the work place. It is then the employer’s duty to
supply the employees as well as it is the employer’s ability to create an organizational
culture that nurtures this need. Once the individual finds his/her place in the group the
need for building the self-esteem and find respect occur. This is the need of being
confident and finds achievement in the tasks that we perform. This also includes the
need of self-reputation and prestige in the work that we perform. This can be obtained
from harmony in the work force and the possibility for the individuals to feel as being
part of a community at the workplace. This can be actualized by activities at the work
place in which all of the companies’ members can be a part of and that takes place
outside the actual work. It can also be actualized in recognizing unique competences
and promoting. This leads to the needs of being and self-actualization in the individual.
This means that the individual has the need of using all of its potential and be in charge
of their own life and in some sense the creativity.

Two factor theory

This chain of thought made by Maslow was taken a step further by Hertzberg
when he created his two-factor theory on motivation. Hertzberg divided the needs into
two categories of factors, hygiene factors and motivator factors. Hygiene factors relate
to the needs that involve the context of the work and if these needs are not satisfied or
are below an accepted level of the employee there will appear job dissatisfaction.
Hertzberg’s hygiene factors can be related to Maslow hierarchy of needs and primarily
the basic needs in the bottom of the hierarchy. The hygiene needs accommodate the
need that rise from Maslow’s proposed physical needs, safety needs, social need of
belonging and self-esteem. These needs are being described by Herzberg as needs
that do not make the employees satisfied in their job, the needs merely avoid
dissatisfaction if fulfilled. The hygiene needs refer the working conditions and how well
we relate to our coworkers and if we are appreciated. If these needs are neglected, they
can have a negative impact on the result of the individual work performance. As an
opposite if the needs are fulfilled, we do not automatically feel satisfied with our work,
hence, not automatically being efficient. It can, however, remove obstacles that prevent
us from having a positive job attitude. The motivator factors, on the other hand,
concerns the content of the work itself and can generate more directly a job satisfaction.
The satisfaction originates from the individual’s own fulfillment of self-actualization when
performing the job. The distinct difference between the two factors of Herzberg is that
the hygiene factor relates to satisfy the need of fair treatment. The motivator factor is
more a question of satisfying the need for creativity in our work. Motivator factor can
also be linked to the top of the hierarchy of needs by Maslow. The motivator needs are
overlapping the hygiene needs when it comes to the self-esteem since it can affect both
how creative we are in our work as well as how well treated I consider myself to be. The
main theme for the motivators is still the need for growing and achievement at our work
which is the same as the top need in the hierarchy of needs. The employer’s job is to
find incentives that can both stimulate the hygiene factors and the motivator factors by
offering incentives that enhance both the employee’s job satisfaction as well as their job
performance.
Hertzberg also states that the failure of enhancing job satisfaction as well as job
performance can be traced back to the attempt of rewarding the avoidance need solely
with a monetary reward. This means that a monetary reward can fulfill avoidance needs,
things we want to avoid. One example of this is the avoidance of feeling mistreated at
the work place when the rewards is unevenly spread which is one of the hygiene
factors. Monetary reward can have a solid purpose, according to Herzberg, if it is used
as a direct reward for individual performances in order to give recognition and praise
good achievement which is seen as motivator needs. But monetary rewards have its
limits and only work up to a certain point and after that other forms of rewards are
needed. Consequently, in order to be efficient, the organization needs to have both
monetary and- non-monetary rewards. A reward system is a combination of both
monetary and non-monetary rewards. Reward systems can therefore be seen as a way
for the managers and employers to satisfy the hygiene needs as well as the motivator
needs and thereby can create efficiency.
 Lesson 4:
Goal-setting Theory

Learning Objectives:
1. Describe the goal-setting theory and how it relates to the motivation and reward
systems in an organization.
2. Understand the employees decision-making process and conduct.

What is goal-setting theory?

Locke is taking a process approach to motivational theories through his goal-
setting theory just as the theory developed by Vroom. The main difference between the
two is how the authors regard to the expectancy of a reward and the performance.
Vroom sees a positive relation between expectancy and performance in a linear way.
Locke on the other hand, even if he agrees with this assumption, also takes into
consideration that the more difficult the goal is the more difficult it is to obtain it and
thereby could potentially have a negative relation. Therefore, he stresses the
importance of making a separation between the expectation within and between goals
conditions. In the goal-setting theory.
Locke is also stating that the theories developed by other authors were too
focused in the unconscious in finding what motivates the individual. The goalsetting
theory takes into deliberation the conscious motives that exist when the organization
sets goals that need to be met. These goals can create motivation for the employees if
they are handled and developed in an accurate way. The basic assumption in goal-
setting theories is, according to Locke, that the employee has been giving a task and is
given feed-back on the progress. The progress is measured in relation to the goal of the
task or the organization. The goals might be set by the organization but it can also be
done on an individual level as well. The goal can be defined as the aim for an action
and they can be both internally and externally explained. The internal goal is the end
result or the notion that we strive to achieve. The external goal regards the object we
want to obtain such as a job or a level of performance. “The idea guides the action to
attain the object”.
 For the organization to maintain the highest level of performance the goal-setting
theory means that the goal itself need to be both highly specific and at a high level of
difficulty. In order to obtain the core benefits from this the organization has to make sure
that there is enough amount of knowledge within the employees to achieve the goals.
However, organizations must take into consideration that the level of goal commitment
with the employees also affects the outcome. This is especially critical if the goals are
both difficult to achieve and specific. The employee that is set to obtain a goal and
perform a task needs to feel that the goal itself is important. According to this theory a
goal is necessary in order to create motivation within the employees to performer better
than before. This can be done in several ways and using a reward system is one of
them. Locke indicates that monetary rewards can improve the sustainability of a
person’s commitment as well as a person’s performance. A monetary reward can
thereby make the employee to repeat his/her behavior. However, monetary rewards
have no effect if the goals are set on a level that is impossible to obtain. To obtain the
highest level of commitment from the employees the employer and the organization can
as an alternative adjust the goals so that the goals fit the capacity of the employees.
The employer can also provide training and raise the level of experience so that the
employees meet the level of the goal. The last option that Locke raises is the ability to
increase the level of self-perception within the employees so that the individuals feel
that they have the ability to reach the goals. Locke means that a person or an employee
does not necessarily have to be assured that the goal is obtainable as long as they feel
that the personal effort is contributing to a positive outcome. This leads to the self-
efficiency of the employee and how well the employees react to the feedback given or if
the goal that are being set are accepted or not.

Principles of the goal-setting theory

According to Locke's goal-setting theory, there are five main principles of setting
effective goals:
1. Clarity: Goals must be clear and specific. When employees understand project
objectives and deadlines, there is much less risk for misunderstandings.
2. Challenge: Goals should be sufficiently challenging to keep employees engaged
and focused while performing the tasks needed to reach each goal. Goals that
are too tedious or easy have a demotivating effect and will, therefore, result in
less achievement satisfaction.
3. Commitment: Employees need to understand and support the goal they are
being assigned from the beginning. If employees don't feel committed to the goal,
they are less likely to enjoy the process and ultimately achieve the goal.
4. Feedback: Feedback is an important component of the goal-setting theory.
Regular feedback should be provided throughout the goal-achieving process to
ensure tasks stay on track to reach the goal.
 5. Task complexity: Goals should be broken down into smaller goals. Once each
smaller goal is reached, a review should be performed to update the employee
on the overall progress towards the larger goal.

Self-efficiency
Self-efficiency is the concept of the individual perceiving to be able to perform to
his/her fullest. The level of self-efficiency will influence the level of motivation as well as
the outcome of the performance. For the employers’ point of view there is a possibility to
improve an employee’s performance, the level of motivation and the choices the
individual make through the improvement of the employees’ self-perception. Feedback
is an important part in the goal-setting theory since it gives the employees an
understanding of how well they are performing. This will have an impact on how
effectively the employees will perform the task needed to obtain the set goal. Without
any feedback the employees will not try to improve their behavior or challenge them self
into overcoming past performance. This will thereby lead to an inefficient output for the
entire organization. Since the reward system has no positive impact on the efficiency if
the goals are impossible to reach the difficulty arises to balance the rewards so that it
fits with the goals. There is a possibility that the reward connected to a certain task and
outcome is overpowering other tasks that are just as important but not related to the
goal itself. When linking the goal-setting theory to a reward system there is, according to
Locke, four different methods to use for the employers. One is to extend the goals a
little bit further than before and for those who achieve them there will be a substantial
bonus. The downside to this method is that if the employees have laid down an
extensive amount of work and still not been able to reach the goal, hence no reward will
be distributed and that can lay down the ground for dissatisfaction. One way of avoiding
this is to offering a reward system that does provide different levels of rewards linking to
different levels of goals. Since even the lower levels of goals will provide a level of
rewards, the motivation to strive higher to a higher goal might not occur. This is in some
sense solved, even if it is not done entirely, by the third method. This method is
imposing a linear reward system where there will be a substantial increase to the
reward as the employee climb towards a higher goal. The fourth and last method links
goal-setting to a reward system by motivating the employees with pay for performance.
There will be specific task with a given goal and the employee will be receiving at
reward based on how well the task has been executed. The level of the reward will
thereby be set afterwards which gives the employer the ability to take the entire context
of the execution into consideration when offering the reward. This however requires well
trained managers who have the ability to make correct and fair decisions. Even if the
theories proposed by Locke in most terms refer to a financial, foremost monetary,
reward when linking goal-setting theory to the reward system, we will not make such a
drastic distinction.
 Lesson 5:
Expectancy and Equity Model

Learning Objectives:
1. Describe the valence, instrumentality, and expectancy model.
2. Determine how much effort the employee will actually provide.
3. Identify the advantages and limitations of the expectancy model.

Expectancy theory
Having discussed what, the employee can strive for and the ability for goal-
setting to create motivation it gives rise to a new question. What determines how much
effort the employee actually will provide? Locke discusses the possibility that the
workers will not strive to reach the highest goal that is related to the highest reward.
Vroom has developed an insight and gives an explanation to this with his expectancy
theory or VIE theory. The VIE theory discusses how much effort a person will contribute
with and what performance this effort will result in base on how they value the outcome.
The theoretical model consists of the valence, instrumentality and expectancy of the
individual (VIE). The basic of the theoretical model is that the employee will only get
motivated and hence try to reach a goal if they value the outcome. They must also find
the performance needed as instrumental in reaching the outcome. This is explained as
the employee’s perception of the causal effect between their behavior and the reception
of the reward. This will be obtained of the employee feels that they have the capability
to perform in an accurate way that is instrumental to reach the goal.

Valence
It is defined as the valuation of the actual outcome or the result of one’s
performance. The difference is made on the basis if the employee is indifferent or not to
the outcome. If the result is not attractive to the employee the valance would be
negative. A positive valance is created if the employee has any interest in attaining the
outcome.

Instrumentality
This consists of the individuals’ thoughts of the probability that their performance
would actually result in a particular outcome. For the employee a high instrumentality
comes from the notion that if he/she shows off good work result there will be a sufficient
reward. A low instrumentality would be of the employee feels that the result of the
reward will not be dependent on this particular work result. As shown the opposite, high
instrumentality, arise from that if the employee would receive the reward at all a good
work-result is a necessity.

Expectancy
The belief that there is a probability that they can perform in a way the leads to a
positive result. For the employee the amount of effort he/she is willing to put in is
influenced on the expectance of the outcome of the effort. If the employee works hard
then he/she can expect a good work result hence a higher reward. The belief within the
employee comes from the notion that he/she has the capacity and the skills needed to
influence the outcome. This can be related to the term self-efficiency that Appelbaum
and Locke discussed earlier regarding the employee’s ability to perform to its fullest.
Thereby, regardless of the reward offered if the employee does not feel that they have
the adequate skills needed to obtain the goal they will most likely not reach it. The
employee might have a high valence towards the outcome but do not have the belief
(expectancy) or the instrumentality needed to perform.
Thus, the expectancy theory concentrates on the following three relationships:

 Effort-performance relationship: What is the likelihood that the individual’s

effort be recognized in his performance appraisal?
 Performance-reward relationship: It talks about the extent to which the
employee believes that getting a good performance appraisal leads to
organizational rewards.
 Rewards-personal goals relationship: It is all about the attractiveness or
appeal of the potential reward to the individual.

Advantages of the Expectancy Theory

1. It is based on self-interest individual who want to achieve maximum satisfaction

and who wants to minimize dissatisfaction.
 2. This theory stresses upon the expectations and perception; what is real and
actual is immaterial.
3. It emphasizes on rewards or pay-offs.
4. It focuses on psychological extravagance where final objective of individual is to
attain maximum pleasure and least pain.

Limitations of the Expectancy Theory

1. The expectancy theory seems to be idealistic because quite a few individuals

perceive high degree correlation between performance and rewards.
2. The application of this theory is limited as reward is not directly correlated with
performance in many organizations. It is related to other parameters also such as
position, effort, responsibility, education, etc.

Implications of the Expectancy Theory

1. The managers can correlate the preferred outcomes to the aimed performance
levels.
2. The managers must ensure that the employees can achieve the aimed
performance levels.
3. The deserving employees must be rewarded for their exceptional performance.
4. The reward system must be fair and just in an organization.
5. Organizations must design interesting, dynamic and challenging jobs.
6. The employee’s motivation level should be continually assessed through various
techniques such as questionnaire, personal interviews, etc.
List of References
Appelbaum H. Steven, Hare Alan, (1996), “Self-efficiency as a mediator of goal setting
and performance”, Journal of Managerial Psychology, Vol. 11, Issue 3, ISSN 0268-
3946, pp. 33- 47
Armstrong Michael, (2003),” Employee reward”, CIPD House, London, 3rd edition.
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 Table of Contents

Introduction …………………………………………………………………………………..….1
Lesson 1: The Ability to Motivate……………………………………………………………...2
Lesson 2: Rewards and Reward System……………………………………………………..5
Lesson 3: Motivation Theory and Human Needs…………………………………….
……....7
Lesson 4: Goal-setting Theory…………………………………………………………...
…...10
Lesson 5: Expectancy and Equity Model………………………………...…………….……
13
List of References……………………………………………………………………….….
….16