Which aspects of the working relationship can contribute to the motivation of employees? - Chapter 8

This chapter discusses the most important aspects of the working relationship that can contribute to motivating the employee. The nature of the psychological contract between an individual and the organization is described. Furthermore, three factors are discussed that play a central role in the exchange relationship between individual and organization: performance evaluation, payment, and careers.

What is a psychological contract between the employee and the organization?

A psychological contract is the perception of the employee about his or her exchange relationship with an organization, about what he/she will receive from the organization in the field of remuneration and what he/she has to do in return for the organization.

In the formation of psychological contracts, three sources of information are used: direct communication with employees and supervisors, observations of what is actually going on in an organization and finally written documents.

Psychological contracts can already be formed before the employee is employed by the organization, for example during recruitment. A 'realistic job preview' (RJP) is an honest assessment of the advantages and disadvantages of a particular job and the organization. Once an employee is employed, communication is received directly from the other members of the organization. This forms the basis of the psychological contract. To keep employees satisfied and motivated, giving an RJP in advance is sensible.

By means of observation, information is obtained about how similar employees behave and are treated, how they work and how the managers behave. This changes the psychological contract.

Lastly, information is obtained through written documentation. You can think of, for example, the organization's website.

There are two types of psychological contracts: the transactional and the relational contracts. Transactional psychological contracts are usually short-term and very specific contracts that are flexible and contain few obligations. These contracts are mainly focused on extrinsic rewards such as salary. The relational psychological contracts, on the other hand, are of long duration, very general and the employee and the organization expect a lot from each other. With these contracts, extrinsic rewards are still important but here intrinsic rewards are also involved. The employee and the organization than have an effective relationship. Note that the perception of the employee determines what type of contract it is.

Due to a number of recent developments, such as massive redundancies and outsourcing of work to low-wage countries, researchers are wondering what the consequences are for the psychological contracts.

If a psychological contract is broken as a result of a failing organization that does not keep its promises the motivation and work of the employee will suffer. The employee will have a negative experience with their job and may even start looking for another job. The same uncertainty arises when it concerns psychological contracts from other employees, for example, if a company is going to outsource confidence in the organization then diminishes and the employee starts to worry about the future of his job.

If organizations want to take actions that could possibly damage the employee's psychological contract, the organization must do so cautiously. They have to make clear what the action is, why it is being taken and what the future might look like after the action. What is important is the way in which organizations deal with employees whose contracts have been broken. This affects the perception of all employees.

How can you evaluate performance?

Employees will be motivated to perform if they think managers can evaluate well. Motivation and work execution is of great importance for the effectiveness of an organization therefore, researchers have paid a great deal of attention to how work performance can be investigated.

Performance appraisal refers to evaluating work performance to stimulate the employee's motivation and work performance and to use the information obtained in making administrative decisions.

A beating evaluation gives the employee two important pieces of information. First of all, they learn how well they are doing with their work and also how much they contribute to the organization. Secondly, it becomes clear to the employee to what extent they put their attention and commitment in the right direction, on the right tasks. This evaluation provides the employees with feedback and this contributes to their intrinsic motivation.

Performance evaluation also provides information that can be used for administrative decisions. Firstly, performance evaluation can be used to decide the distribution of outcomes, such as salary or promotions equitably. Secondly, it can allow managers to make more efficient use of the skills of the employees. Thirdly, it can warn managers about problems in task design, motivation, and outcomes. Lastly, it helps employees plan their careers.

Managers can use the information on the performance evaluation for two purposes: first for developmental purposes (such as determining how you can motivate employees to perform at a high level, evaluating which weak point can be corrected by training) and secondly evaluating decision making purposes (such as deciding who gets promotion or which salary is appropriate).

A performance appraisal system can be established. To develop an effective 'performance appraisal' system, choices have to be made. Four of these choices are discussed below: the extent to which formal and informal evaluations can be used, which factors must be evaluated, which evaluation methods should be used, and who will evaluate the work performance.

1. Mix of informal and formal evaluations

A formal evaluation refers to an evaluation that takes place at a fixed time, for example, every three years. Informal evaluations take place throughout the year. An employee is immediately alerted to errors or is immediately told that the work is done well. Large organizations often use formal evaluations and small organizations use informal evaluations. Nevertheless, a mix of both is recommended.

2. Which factors are evaluated?

You can evaluate different aspects of the work. The three most common are:

1. Traits of the employee; traits are often permanent and can not be changed quickly and they do not have to say anything about how someone does his/her work.

2. The behavior; in this aspect, attention is paid to their behavior at work. Managers can give employees instructions on which behavior they should change. The disadvantage of this is that sometimes you can achieve a goal with different behaviors, for example, one may reach a decision carefully through long term research and another may reach the same decision based on gut instinct.

3. The results; it looks at how much someone has produced or how the quality of his or her work. The disadvantage is that results are not always under the employee's control. Employees can, therefore, become so result-oriented that it does not benefit the quality of the work.

3. Methods of evaluation

If it is evaluated in an objective way then usually only the results are looked at. Subjective measurements are measurements based on an individual's traits. In a subjective way of evaluation, in addition to the results, the characteristics of the employee and his/her behavior are usually included in the evaluation. In this case, a number of scales can be used in the evaluation. The three most important ones are highlighted below.

1. Graphic rating scale; with this scale the work behavior is evaluated on a continuum. However, the work behavior to be evaluated (e.g. customer-friendliness) is not clearly defined.

2. Behavioral anchored rating scale (BARS); this allows you to evaluate specific work-related behavior. They are clearly defined behaviors but certain behaviors occur on more than one point on the scale.

3. Behavioral Observation scale (BOS); on this scale the frequency with which an employee performs a particular behavior is measured. It not only describes the behavior as BARS, but also its frequency. However, it is very time-consuming.

4. Who carries out the evaluation?

There are different forms of evaluation, such as a self-evaluation where you evaluate yourself. What is worth taking note of is that everyone judges themselves as above average. You can also be evaluated by peers like colleagues, this is called peer appraisal. Evaluation by superior people is called supervisor appraisal. In addition, there is the subordinate appraisal; here the assessment is completed by employees in regards to the manager.

Of course, customers or clients may also give their opinion with a customer/client appraisal.

Finally, there is the 360-degree appraisal. This means an evaluation is completed by everyone who has to deal with a certain employee such as their boss, colleagues, people who work under him/her and their clients. The evaluated people receive worthy feedback that can help them to improve their performance. The disadvantage of this evaluation is that it may become a bit of a popularity contest. Furthermore, for example, managers will be reluctant to take strict measures because they are afraid of bad evaluations. In any case, it is wise to keep evaluations anonymous, so everyone will fill out the survey with honesty.

How do pay and working relationships influence each other?

An accurate work evaluation is, therefore, motivating for the employee and helps to make administrative decisions. An area on which decisions are made is the distribution of rewards. Money, as a reward, is one of the most powerful resources to motivate. If possible, it must be based on performance.

Merit pay is pay given based on the quality of the performance. This enhances motivation more than a reward that is not based on performance. In times of economic crisis, it is often difficult to give a salary increase to good employees. The reward does not necessarily have to be money it may also be shares or holidays.

Performance reward is based on performance but on whose performance can it best be based: the individual, the group or the organization? If there is a clear division of roles within an organization, then the reward based on the individual 's performance is the best approach for higher motivation. Suppose, however, that the employees within an organization are very dependent on each other, for example through production line work, then the best approach for a higher motivation is group or organizational remuneration. When the effectiveness of an organization is related to how well the employees work together, the best way to increase motivation is also group or organizational remuneration but it is also possible to combine, for example, a group reward and an individual reward.

There are two forms of performance reward: salary increase and bonuses. Increasing the salary of an employee has the least influence on motivation. One reason for this is that the increase in salary is usually relatively small compared to the total salary. In addition, salary increases are only partially dependent on performance and, lastly, employees' salaries do not differ very much in comparison with the difference in performance levels.

On the other hand, a bonus has a much greater impact on the motivation level. The reason for this is that bonuses do not have limitations. The performance reward can be based on individual performance and performance of the organization. Two clear examples of performance-related pay plans based on individual performance are 'piece-rate pay' and 'commission pay'.

In a piece-rate pay plan, an employee is paid for each unit that he/she produces.

At commission pay, the employee's salary is a percentage of the total sales. There are two commission pay options, partially and completely. With partial commission, people receive a certain fixed amount and in addition a bonus that depends on how much is sold.

With full commission, the employee's salary is only dependent on the amount that is sold. The advantage to this is that employees are extremely motivated and the disadvantage is that there is little to no team spirit at all.

Pay plans where the remuneration depends on the performance of the organization and not the personal performance are called gain-sharing plans. An example is the Scanlon plan, here the idea is that employees get a part of the saved money if the costs are reduced. Another form is profit sharing where the employees receive part of the profit.

Differences in salary based on a difference in gender, race, religion, age, ethnic background or other non-performance related characteristics is completely unethical. Furthermore, there are more and more discussions about the huge difference in pay between managers and ordinary employees.

Comparable worth is the concept where those who have a similar job receive similar pay regardless of differences in the work and the personal characteristics of the employee. However, this is difficult to put into practice.

Careers

Not only is money used as a reward to increase motivation career opportunities may also act as a reward. This does not have to be career opportunities within the same company. When careers are effectively managed, an organization makes optimal use of the talents, motivation, and abilities of their employees, therefore, these employees will remain motivated to perform at a high level and this all helps to achieve the goals of the organization.

A career is the sum of all work-related experiences in a person's life. A career gives an intrinsic (donates personal satisfaction) and extrinsic (money for hobbies and maintaining family) motivation. There are different types of careers and these can be divided into four different categories:

1. Steady-state careers; a person's commitment to a certain job which is held through their entire life.

2. Linear careers; a person changes jobs and the new job is always of a higher position than the previous job. (This can be within one company, then you work up, but it can also be in several different companies)

3. Spiral careers; if a person always changes jobs and the new job is always of a higher position but fundamentally different.

4. Transitory careers; if someone changes jobs very often and these jobs all differ from each other.

A boundaryless career means that careers are not tied to one organization and that people have experience in many different environments.

A career takes place in a number of phases we will discuss these phases below:

1. Preparing for a job; one must decide what job they would like and then must begin gaining qualifications and experiences for a particular job. Personality, skills, attitudes, and values play a role in choosing a career.

2. Entering an organization; a suitable job is being looked for during this stage. A lot of information is sought and people try to apply. You only get a realistic idea about a job if the organization gives you a correct picture of the job, including all negative and positive characteristics.

3. Early career; this stage starts once you have received a job in the chosen career direction. At this stage, two different steps can be distinguished: establishment and achievement. During the first step of establishment you have to get used to everything, if you want to learn everything, you have to figure out what is expected of you and do your very best to integrate. This evolves into the achievement step. In this phase, you know how everything works within the organization and now you really want to contribute to the organization. This is often done by looking for a 'mentor' in the company and setting career goals. A career goal can involve all the experiences, positions and jobs that someone wants to fulfill in his/her career.

4. Middle career; here you are usually on a career plateau. This means a position where your opportunities for promotion or a job with more responsibility become smaller and smaller. One reason for this may be that your knowledge and skills are obsolete for example this may be caused due to technological progress.

5. Late career; in the late-career, you encounter the same problems as in the middle of your career.

There are many challenges today for career managers within organizations. Three examples are ethical career management, career management that supports diversity, and career management in a society where both partners aspire to a career. Everyone within an organization must pursue his/her career ethically, based on honesty, trust, and open communication. Everyone must also have equal career opportunities within an organization independent of one's race, gender and age; so career management that supports diversity. The final challenge is career management in an era in which both partners aim for a career within a relationship. For example, organizations can take the following steps: limit as much moving/traveling as possible, allow flexible work agreements and organize childcare.