Org

aniz

atio

nal B

ehav

ior

Chapter Seven

Rewarding Organizational Behavior

Org

aniz

atio

nal B

ehav

ior

Rewards

• Why do organizations have rewards? • Should organizations have rewards?• How do you want to be rewarded at work?• What should your rewards be based on?• How does motivation, behavior, individual

differences, culture affect rewards? • How does feedback play into the reward?

Org

aniz

atio

nal B

ehav

ior

Feedback

Feedback: “Objective information about individual or collective performance.”

Functions of Feedback: - Instructional - Motivational

Org

aniz

atio

nal B

ehav

ior

Feedback and Rewards Are Important Links In the Job Performance Cycle

Results• Learning

• Personal development• Stable, strong job performance

Properly administered

rewards

Timely and instructivefeedback

EffortAbility

Org

aniz

atio

nal B

ehav

ior

A Cognitive-Processing Model of Feedback

RecipientCharacteristics• Self-esteem• Self-efficacy

• Needs and goals• Desire for performance

feedback

Perception• Sign and content of

feedback message

Cognitive Evaluations• Feedback accuracy• Source credibility• System fairness

• Expectations• Behavioral standards

Sources

• Others

• Task

• Self

Behavioral Outcomes

• Direction

• Effort

• Persistence

• Resistance

Org

aniz

atio

nal B

ehav

ior

Six Common Trouble Signsfor Organizational Feedback Systems

Feedback is used to punish, embarrass, or put down employees

Those receiving the feedback see it as irrelevant to their work

Feedback information is provided too late to do any good

People receiving feedback believe it relates to matters beyond their control

Employees complain about wasting too much time collecting and recording feedback data

Feedback recipients complain about feedback being too complex or difficult to understand

Org

aniz

atio

nal B

ehav

ior

Some Concluding Tips forGiving Good Feedback

Managers need to keep the following tips in mind when giving

feedback: Relate feedback to existing performance goals and clear

expectations. Give specific feedback tied to observable behavior or measurable

results. Channel feedback toward key result areas. Give feedback as soon as possible. Give positive feedback for improvement, not just final results. Focus feedback on performance, not personalities. Base feedback on accurate and credible information.

Org

aniz

atio

nal B

ehav

ior Nontraditional Feedback

Upward Feedback: Subordinates evaluate their manager’s style and performance.

360-Degree Feedback: Specific (typically anonymous) feedback generated by one’s manager, peers, subordinates, and other key people.

Org

aniz

atio

nal B

ehav

ior

Sources and Types of Feedback in the 360-Degree Approach

Direct supervisor

Peers/teammembers

Directsubordinates

Relevant others such as

customers and suppliers

Manager/Focal PersonSelf-evaluation of:

• Planning/administrative/financial skills

• Technical/business skills• Interpersonal skills

• Problem-solving skills• Team-building skills• Other relevant skills

Org

aniz

atio

nal B

ehav

ior

The Reward Process

Motivation to exert effort

Performance:Individual

Experience

Ability & Skill

PerformanceEvaluation Satisfaction

ExtrinsicRewards

IntrinsicRewards

Feedback

Org

aniz

atio

nal B

ehav

ior

The Reward Process

• Satisfaction with a reward is a function of both how much is received and how much the individual feels should be received. (Equity theory)

• An individual’s feelings of satisfaction are influenced by comparisons of what happens to others.

• Satisfaction is influenced by how satisfied employees are with both intrinsic and extrinsic rewards.

• People differ in the reward they desire and in the relative importance different rewards have for them

• Some extrinsic rewards are satisfying because they lead to other rewards.

• Rewards must be valued and must be related to a specific level of job performance

Org

aniz

atio

nal B

ehav

ior

The Reward Process

• Extrinsic rewards – external to the job. What are examples?

• Intrinsic rewards – part of the job itself. What are examples?

• How do intrinsic and extrinsic rewards interact?

• How do rewards influence turnover and absenteeism? Is a low turnover always good?

Org

aniz

atio

nal B

ehav

ior

General Model of Organizational Reward Systems

Organization’s Reward Norms

• Profit maximization• Equity

• Equality• Need

Distribution Criteria• Results

• Behavior• Other factors

Types of Rewards• Financial/material

(extrinsic)• Social (extrinsic)• Psychic (intrinsic)

Desired Outcomes • Attract

• Motivate• Develop• Satisfy• Retain

Org

aniz

atio

nal B

ehav

ior

Why Do Rewards Fail to Motivate?

• Too much emphasis on monetary rewards• Rewards lack an “appreciation effect”• Extensive benefits become entitlements• Counterproductive behavior is rewarded• Too long a delay between performance and rewards• Too many one-size-fits-all rewards• Use of one-shot rewards with a short-lived

motivational impact• Continued use of demotivating practices such as

layoffs, across-the-board raises and cuts, and excessive executive compensation

Org

aniz

atio

nal B

ehav

ior

How To Make Team-Based Pay Work

Prepare employees with interpersonal skills training.

Don’t introduce team-pay until teams are running smoothly.

Blend individual and team incentives.Start by rewarding teamwork behaviors and

then evolve to incentives for team results.Make sure each team member has a clear line

of sight to key team results.

Org

aniz

atio

nal B

ehav

ior

Non-Traditional Rewards

• Cafeteria benefits• Time off (banked)• Skill-based pay• Gainsharing vs profit sharing

Org

aniz

atio

nal B

ehav

ior

Profit Sharing vs. Gainsharing

Profit sharing: “Occurs when individual employees or work groups are granted a specified portion of any economic profits earned by the business as a whole.”

Gainsharing: “Involves a measurement of productivity combined with the calculation of a bonus designed to offer employees a mutual share of any increases in total organizational productivity. Usually all those responsible for the increase receive the bonus.”

Org

aniz

atio

nal B

ehav

ior

Making Pay for Performance Work

Make pay for performance an integral part of the organization’s basic strategy.

Base incentive determinations on objective performance data.

Have all employees actively participate in the development, implementation, and revision of the performance-pay formulas.

Encourage two-way communication so problems with the pay-for-performance plan will be detected early.

Build the pay-for-performance plan around participative structures such as suggestion systems or quality circles.

Org

aniz

atio

nal B

ehav

ior

Making Pay for Performance Work(continued)

Reward teamwork and cooperation whenever possible Actively sell the plan to supervisors and middle managers

who may view employee participation as a threat to their traditional notion of authority

If annual cash bonuses are granted, pay them in a lump sum to maximize their motivational impact

Remember that money motivates when it comes in significant amounts, not occasional nickels and dimes