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Leadership and job motivation in international corporate governance

Cultural influences on the design of incentives and employee benefits

Seminar Paper 2014 19 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Table of Contents

1 Introduction

2 Motivation Theories and their Country-Compatibility
2.1 Herzberg’s Two-Factor Theory
2.2 Maslow’s Hierarchy of Needs

3 Application of Reward Systems
3.1 Different Types of Reward Programs
3.2 Incentive Systems Applied in Different Cultures

4 Conclusion

5 Appendix 1

6 Appendix 2

7 Appendix 3
7.1 List of Abbreviations
7.2 Bibliography
7.3 Images
7.4 Tables

1 Introduction

“What is rewarding to different people varies greatly depending on their background, expectations, values, and needs. The value of money, [...] professional respect and, the need for challenging assignments all vary according to lifestyle and culture͘” (Jamieson/O’Mara 1991, p. 109)

For today’s globalized companies, the problem of how to effectively motivate staff is becom- ing more and more vital. During the last decades, a vast number of incentive schemes and 3 bonus plans have been developed by researchers and are applied in daily business. By now organizations have realized to appropriately view employee rewards as a kind of key invest- ment, rather than one of their largest expenses. But why do people put so much effort in researching and ascertaining incentive systems? Companies want to ensure that good and well-trained employees do not leave the company and they are desperately trying to avoid the recruitment of new professionals. To reach these goals companies should use the inter- dependencies of linking rewards, results, and employee motivation, which can be one of the most value-added human capital strategies (Chen/Hsieh 2005, p. 155).

In the meantime the process of globalization is accelerating this development. The growing demand for highly skilled employees is intensifying the competition for workers in certain specialized industries and regions. On the other hand companies are expanding to new mar- kets and countries in order to secure future business success. This dynamic has a direct im- pact on the value employers are placing on retaining employees and increasing employee productivity as well.

The key questions to be answered in this context are: If an organization moves to multina- tional areas, do any problems in designing rewards arise due to different cultural under- standings? And if so, what is seen as motivating in specific cultural environments and what can be seen as non-motivating in multinational firms and international joint ventures?

In order to answer these questions I will justify the use of rewards and incentives based on a description of frequently used work motivation theories. Additionally I’m going to examine the scientific models for a certain ‘country-compatibility’. In a second step I will go into more depth by defining and differentiating between types of rewards. Furthermore I’m going to put my findings into a global context by introducing a theory which involves the influence of culture or cultural variations on organizational dynamics and employee performance.

2 Motivation Theories and their Country-Compatibility

Starting from the 1950s theorists and practitioners have shown great interest in employee motivation. Along with investigations in areas such as Organizational Behaviour and Human Resource Management (HRM), motivation of employees has become a fascinating research topic. The predominant study focus has been placed on the process of motivating employees as well as on rewards which individuals find motivating.

2.1 Herzberg’s Two-Factor Theory

In the 1950s Frederick Herzberg, a native-born US psychologist, conducted the studies on satisfaction and dissatisfaction of people at work. His original study comprised about 200 engineers and accountants in western Pennsylvania. He asked the workers to describe occa- sions where they have felt exceptional good and satisfied and one were they have felt excep- tional bad and dissatisfied.

Herzberg believed in two factors that are related to the experience and feelings of the em- ployees. One factor was called motivation factor, those work conditions are related to the need for psychological growth. The other factor was called hygiene factor, those work condi- tions related to dissatisfaction, which can be caused by discomfort or pain. Motivational fac- tors are leading to a superior performance of the employee and yield positive satisfaction. Those factors include different parts like recognition where the employees should be digni- fied and recognized for their accomplishments. In contrast hygiene factors are necessary to built motivation. They do not lead directly to satisfaction, but if they are missing dissatisfac- tion arises. Both factors describe the job environment and symbolize needs which the em- ployee wants to be fulfilled.

One part is the pay or salary which should be appropriate, equal, reasonable and competitive to the same branch or industry domain. However it was revealed, that the work itself and accompanying achievements are other vital needs as well.

Nevertheless the existence of such hygiene factors shows impressively that managers must make sure that work is stimulating and rewarding in such a way, that employees are moti- vated to work and perform harder and better. The theory of Herzberg emphasizes upon job- enrichment so as to motivate employees. Guaranteeing the adequacy of hygiene factors, like payment or fringe benefits, is vital to avoid employee dissatisfaction (Nelson/ Campbell-Quick 2007, p. 127 ff.).

Well, with the growth of international business, numerous other authors expanded their exploration of reward practices to other countries and cultures. In this context a number of researchers found that the theory of Herzberg does not necessarily work in different institu- tional frameworks, in other words, in different countries. As a result plenty of surveys have been conducted which all led to the conclusion that the basic motivation model of Herzberg does not apply to all group of workers without country-specific modifications. For example it 5 has been shown that French managers are rather motivated by job context factors, such as working conditions, hour's earnings, benefits and promotions, rather than by the motivators of Herzberg's study (Gunkel 2006, p. 11).

2.2 Maslow’s Hierarchy of Needs

In the same decade Abraham Maslow introduced another motivation theory by studying the behaviour of monkeys. His study is well known for the term ‘hierarchy of needs’. Maslow’s theory reflected that people have five classifications regarding their necessities which act as motivators. The first classification are physiological needs, the second one are safety and security needs, the third are social and belongingness needs, followed by the fourth status and ego needs and the fifth classification regarding self-actualization (Berl/Willamson/Powell 1984, p. 32).

As shown in Appendix 1, Maslow discovered that needs are prioritised like a hierarchy pyramid. When the first need like food is fulfilled then the second need arises like security or safety and so on.

When we now apply the hierarchy of needs theory to work situations, it implies that team leaders and managers have the responsibility, to make sure that deficiency needs are fully met. This means, in broad terms, a proper salary and safe environment. In a second step, it implies that an appropriate climate needs to be created in which employees can develop their highest potential. Failure to do so would theoretically lead to increased frustration and will finally result in lower job satisfaction, poorer performance, and growing withdrawal from the organization. Potential ways of satisfying the employee’s needs of the belonging level can be reached for example by encouragement of social interactions, like creation of team spirit or the use of periodic praise (Ball 2013, p. 8 f.).

As prescribed before, salaries are part of the pyramid bottom, the so called deficiency needs.

In other words they serve as a measure of security and employees will feel unfulfilled in their need for safety until they have it.

But giving financial bonuses or rewards is a different matter. In Maslow’s hierarchy of needs, these tools of motivation serve to fulfil (self) esteem needs. However, the method how they are awarded is important as well. Incentives should be given in an atmosphere of praise in- stead as simple benefit for reaching a certain goal. In particular incentives can work counter- productively as they will be seen more or less as additional salary. In those cases incentives only serve to satisfy someone’s deficiency needs, or even not at all e.g. if an employee don’t really need the money (Ball 2013, p. 9).

Finally one can say, the theory of Maslow helps to understand reasons for motivating people at work and to understand their specific needs and goals. In this context an interesting defi- nition of the term motivation was derived by Nelson/Spitzer (2003). Both experts say: “Moti- vation is the internal human energy that propels people to satisfy their unmet needs”͘ While we all have the same basic needs, our further priorities may vary. And they have to. Everyone has its own set of additional personal needs. Some of these are easy to meet and inexpen- sive to implement, others are hard to reach and costly in some way. Furthermore job motiva- tion and satisfaction can only be gained if lower steps of needs are fulfilled (Nelson/Spitzer 2003, p. 10).

Whenever possible, managers need to have these coherences in mind if they are in a posi- tion to motivate their staff. However, being a good leader one needs to recognise that peo- ples motives can be deeply divided. In best cases you are able to identify the unmet needs of your stuff. Some people come to work only to earn money (existence needs) and many have no desire either to get on with others (belongingness needs), or even to gain promotion (es- teem needs). Others work to get in touch with people, have a personal challenge and a real sense of achievements (Poston 2009, p. 352; Call of the Wild 2013).

Well, this statement leads to the assumption that Maslow's theory does not apply all levels of employees and even not for all countries. A study of the well known Dutch psychologist Hofstede (1972) verified that Maslow's hierarchy of needs is different for individuals in vari- ous jobs. For example highly qualified professionals find their individual motivators in self actualization and the esteem needs area, religious employees in the social need region and simple unskilled workers can be motivated by factors of security and physiological needs (Hofstede 1972, p. 77 f.). Furthermore, Edwin Nevis states that the Chinese hierarchy of needs consists of four levels, rather than five and that the needs of the society are emphasized (Nevis 1983, p. 20). Based on this outcome Maslow's theory is certainly no ‘panacea’ and should be assessed critically.

In general one can say, that the prescribed motivation theories, same applies for Herzberg, do not necessarily work in all institutional frameworks and do not entirely apply to employee behaviour in different countries. This argumentation implies that the mentioned theories can be considered as not ‘country-compatible’. Mostly developed in Anglo-Saxon countries, 7 the majority of studies often conclude that motivation theories are not applicable in all countries without providing any further insight (Heneman/Fay/Wang 2002, p. 27; Gun-kel 2006, p. 7).

3 Application of Reward Systems

Based on the prescribed motivation theories and the problems deriving thereof, I will now go into more detail by defining and differentiating between different types of rewards. In a sec- ond step I’m going to put my findings into a global context by introducing a theory, which tries to eliminate the mentioned deficiencies. This theoretical work involves the influence of culture or cultural variations on organizational dynamics and employee performance.

3.1 Different Types of Reward Programs

Within the preceding chapter I stated that salary is a payment for doing the basic job. Among others it fulfils essential needs and provides the basis of our actions. Additionally it was outlined, that according to Maslow, rewards apply to higher levels within the individual hierarchy of needs. In a first step I will now outline the term reward.

One approach defines a reward as an item or experience containing a specific value that is provided for a desired behaviour. Others see it as a direct recognition, which awards the achievement of specific performance goals. However these definitions may be read they all are aiming towards a common goal. Benefits or rewards are designed to achieve and protect an employee's well-being (Nelson 2012, p. 4; Schiffers/Shelton 1996, p. 1).

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Details

Pages
19
Year
2014
ISBN (eBook)
9783656651956
ISBN (Book)
9783656694045
File size
1.3 MB
Language
English
Catalog Number
v272860
Institution / College
University of Applied Sciences Wildau – Wildau Institute of Technology
Grade
1,3
Tags
Leadership Motivation Maslow Corporate Governance Incentives Benefits Employees Mitarbeiter Motivation Theory Cross Cultural Incentive Systems Reward Program Herzberg

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Title: Leadership and job motivation in international corporate governance