performance and motivation - summary of theories and application to indian it worker

Indian Institute of Management

Performance through MotivationIn Organizations And Learnings in Indian Context

byAnuroop Vinayak Gaonkar – 2005011

Arijit Chatterji – 2005012Arindam Ray – 2005013Divyesh Dixit – 2005022

Krishnamurthy Hegade - 2005030Srinivas Makala – 2005031

Sai Anil Kumar Veedururu – 20050Vishwanath Belur – 20050

ofPGSEM, Batch of 2005, Sec A, Group 3

TowardsManaging People and Performance in Organizations

Taught byR. Ravi Kumar Ph. D.

Professor, IIM - Bangalore

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Performance & Motivation – An Introduction........................5What is Performance................................................................................................5What is Motivation....................................................................................................6

Copyright © 2006 by Group 3, PGSEM Sec A, Batch of 2005. All Rights Reserved

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Key Theories On Motivation..................................................................................6Hierarchy of Needs Theory (Maslow).............................................................6Theory X and Theory Y (Douglas McGregor)..............................................7Two-Factor Theory (Frederick Herzberg).....................................................7ERG Theory (Clayton Alderfer).........................................................................8David McClelland’s Theory of Needs.............................................................8Cognitive Evaluation Theory...........................................................................10Goal-Setting Theory (Edwin Locke)..............................................................10Reinforcement Theory.......................................................................................10Job Design Theory...............................................................................................10Social Information Processing (SIP) Model................................................11Equity Theory........................................................................................................12Expectancy Theory (Victor Vroom)..............................................................12

Applying Theories in Organizations.................................................................13

The Indian Context.........................................................................................14Meaning & Application of performance and Motivation Theories.........15Learning from Application....................................................................................16Future Direction and some Suggestions........................................................18

References.............................................................................................................20


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Performance & Motivation – An Introduction

The success of any firm is dependent on its ability to perform the desired

functions to achieve its goals most efficiently.


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Peak Performance hence becomes a goal of highest importance. In today’s world as

the visionary thinker of management science Peter Druker says, “The most valuable

asset of 21st century institution will be its knowledge workers and their productivity” -

by which we can infer that that the performance in current day organizations will be

mostly based on the people it has.

Even if a manager in today’s predominantly knowledge based society is unaware of

the above maxim, he/she is acutely aware of the fact that the performance of

individual knowledge worker is determining the success or failure of the organization.

Therefore the search for the silver bullets, which can help one to enhance

performance of knowledge workers, has been relentless in the recent years. One of

the ingredients that impacts performance that can be controlled is motivation. So, in

the succeeding pages we shall see the theories that try to decipher impact of various

entities on motivation and hence its resultant impact on performance.

What is Performance

Performance of an organization is the success it attains it achieving its goals. The

organization has to strive at achieving these goals with minimum of resources. As

there is perennial need to improve performance an organization needs to understand

how it can control and improve the performance.

The essence of controlling anything lies in understanding what it is and what entities

impact its perceived value. In today’s organizations whose growth is propelled by

innovation and technology; the people have become the key ingredient for creating

the growth as they innovate and create the new products and the new technologies

using their knowledge. Hence the performance of these individual is of paramount

importance to the new age organizations. The performance of people in a particular

situation or in a job can expressed as the product of their ability, opportunity and

support provided by the organization, and their motivation.

What is Motivation

Motivation in the work and organizational context is defined as the processes that

accounts for an individuals’s intensity, direction and persistence of effort toward

attaining an organizational goal. Intensity is concerned with how hard a person tries.

The intensity should be channeled in a direction that benefits the organization.


PERFORMANCE = Ability * Opportunity and Support * MOTIVATION

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Persistence is a measure of how long a person can maintain their effort. Motivated

individuals stay with a task long enough to achieve a goal. Motivation is not an

individual trait as majority of the managers think. Level of motivation varies between

individuals and within individuals at different timesi.

Other way of looking at motivation is as the process of creating organizational

conditions that will impel employees to strive to attain company goalsii. One more

view of motivation is that it is the process of arousing and sustaining goal

directed behavior.

The motivation has become the eye grabber in the performance equation because it

probably the easiest to manage out of the 3 ingredients that impact the performance.

Other than this, in light of today’s business condition, motivating people to be at their

best has become more crucial than ever due to various factors like thinning profit

margin due to ever stiffening competition, Economic uncertainty. Only through

motivation can managers help their employees generate the excellent performance

that enables companies to boost profitability and survive-even thrive during tough

times.

Key Theories On Motivation

The key theories on motivation can broadly be categorized in to

Hierarchy of Needs Theory (Maslow)

There is a hierarchy of five needs—physiological, safety, social, esteem, and self-

actualization; as each need is substantially satisfied, the next need becomes

dominant. Self-Actualization is the drive to become what one is capable of becoming.

The five needs are separated into higher and lower order needs. Physiological, safety

and social needs are categorized as lower order whereas esteem and self-

actualization are described as higher order needs. The differentiation between the

two orders is on the premise that higher order needs are satisfied internally within

the person whereas lower order needs are predominantly satisfied externally by

things such as pay, tenure, contracts etc.

i Stephen Robbins, 11th Edition, pp 170ii Hodgetts, Richard M., Introduction to Business, Addison-Wesley, p. 168 (references i)


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Figure1.

Theory X and Theory Y (Douglas McGregor)Theory XAssumes that employees dislike work, lack ambition, avoid responsibility, and must

be directed and coerced to perform.

Theory YAssumes that employees like work, seek responsibility, are capable of making

decisions, and exercise self-direction and self-control when committed to a goal.

Two-Factor Theory (Frederick Herzberg)Intrinsic factors are related to job satisfaction, while extrinsic factors are associated

with dissatisfaction.

Hygiene FactorsFactors, such as, company policy and administration, supervision, and salary—that,

when adequate in a job, placate workers. When factors are adequate, people will not

be dissatisfied.

Content FactorsFactors— work condition related to the satisfaction of the need for psychological

growth and job enrichment. These lead to superior performance and enlist greater

effort.


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Figure 2.

ERG Theory (Clayton Alderfer)The theory categorizes the needs in to 3 categories viz; Existence, Relatedness and

Growth

Existence: provision of basic material requirements.

Relatedness: desire for relationships.

Growth: desire for personal development.

According to the theory more than one need can be operative at the same time, if a

higher-level need cannot be fulfilled, the desire to satisfy a lower-level need

increases.

David McClelland’s Theory of Needs

Need for Achievement: The drive to excel, to achieve in relation to a set of standards, to strive to succeed.

Need for Affiliation: The desire for friendly and close personal relationships.

Need for Power: The need to make others behave in a way that they would not have behaved otherwise.

The theories of Maslow, Alderfer and McClelland can be summarized as below

Figure 3.


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In summary one of most prominent works on defining the process and dynamics of

motivation has been by Frederick Herzbergiii.

The Hygiene Factors are those that are extrinsic to the job and use the 'KITA' (Kick-

In-The-Ass) iv methods to drive people. These factors essentially threaten a KITA if

employees are not compliant and thus use the fear of KITA as a driving force. The

management using such hygiene factors only to govern people essentially subscribe

to McGregor's 'Theory X' v.

On the contrary, the Motivation Factors used to drive people assume that people

basically want to be productive and just need to be given the right conditions and

tools to focus their efforts fruitfully. This is the derivative of McGregor's 'Theory Y'.

Herzberg goes forward to define the two scales of 'Satisfaction' & 'Dissatisfaction'

where he argues that satisfaction & dissatisfaction are not the opposite ends of the

same scale. This is because; in an organization there may be a many situations,

some of which cause satisfaction, while others cause satisfaction, thus creating a

combination of such factors. The 'Hygiene' factors usually define the dissatisfaction

level of employees while the 'Motivators' define the satisfaction levels. The objective

of any organization should be to minimize the dissatisfaction levels and maximize the

satisfaction levels by having an optimal number of Hygiene and Motivator factors

driving the employees.

The various factors within an organization which can be grouped as Hygiene and

Motivators are listed in the table below:-

Hygiene Motivators

Company Policy and Administration Achievement

Supervision Recognition

Interpersonal Relations Growth / Advancement

Working Conditions Responsibility for task

Salary,Status & Security Nature of Work

When deciding the factors used to motivate employees one of the primary challenges

arises from the fact that different people have different factors, that motivate them.

This was articulated by Vroom, Lawler & Porter in the 'Expectancy/Valence' model vi.

This model defined that every person would have a set of personal expectations and

the thus a certain preference or 'valence' for the set of outcomes promised as an

iii http://en.wikipedia.org/wiki/Frederick_Herzbergiv Manage People, Not Personnel – Motivation and Performance Appraisal, HBR, Chap -4, p-49 'One

More Time: How Do You Motivate Employees?' , Frederick Herzberg.v The Human Side of Enterprise, Douglas McGregor


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incentive. The Hygiene and Motivators for employees should be decided based on

their valence.

Cognitive Evaluation TheoryProviding an extrinsic reward for behavior that had been previously only intrinsically

rewarding tends to decrease the overall level of motivation. The theory may only be

relevant to jobs that are neither extremely dull nor extremely interesting.

Goal-Setting Theory (Edwin Locke)The theory conjectures that specific and difficult goals, with feedback, lead to higher

performance.

Factors influencing the goals–performance relationship: Goal commitment,

adequate self-efficacy, task characteristics, and national culture.

Self-Efficacy: The individual’s belief that he or she is capable of performing a task.

Reinforcement TheoryThis theory assumes that behavior is a function of its consequences. The

environment causes the behavior. Behavior can be modified (reinforced) by providing

(controlling) feedback. Reinforced behavior tends to be repeated.

Job Design Theory

Job Characteristics Model: This model identifies five job characteristics and their

relationship to personal and work outcomes. These are Skill variety, Task identity,

Task significance Autonomy and Feedback. Jobs with skill variety, task identity, task

significance, autonomy, and for which feedback of results is given, directly affect

three psychological states of employees:

Knowledge of results

Meaningfulness of work

Personal feelings of responsibility for results

Increases in these psychological states result in increased motivation, performance,

and job satisfaction.

Skill Variety: The degree to which a job requires a variety of different activities.

Task Identity: The degree to which the job requires completion of a whole and

identifiable piece of work.

Task Significance: The degree to which the job has a substantial impact on the

lives or work of other people.


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Autonomy: The degree to which the job provides substantial freedom and discretion

to the individual in scheduling the work and in determining the procedures to be used

in carrying it out.

Feedback: The degree to which carrying out the work activities required by a job

results in the individual obtaining direct and clear information about the effectiveness

of his or her performance.

People who work on jobs with high core dimensions are generally more motivated,

satisfied, and productive. Job dimensions operate through the psychological states in

influencing personal and work outcome variables rather than influencing them

directly.

Social Information Processing (SIP) ModelIt is the fact that people respond to their jobs, as they perceive them; rather than to

the real jobs. Employee attitudes and behaviors are responses to social cues by

others. Employees adopt attitudes and behaviors in response to the social cues

provided by others (e.g., coworkers) with whom they have contact. Employees’

perception of the characteristics of their jobs is as important as the actual

characteristics of their jobs.

Equity Theory

Individuals compare their job inputs and outcomes with those of others and then

respond to eliminate any inequities. Self-inside, Self-outside, Other-inside, Other-

outside are the comparisons individuals make.

Choices for dealing with inequity:

Change inputs (slack off)

Change outcomes (increase output)

Distort/change perceptions of self

Distort/change perceptions of others

Choose a different referent person

Leave the field (quit the job)

Propositions relating to inequitable pay:


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Over rewarded hourly employees produce more than equitably rewarded

employees.

Over rewarded piecework employees produce less, but do higher quality

piecework.

Under rewarded hourly employees produce lower quality work.

Under rewarded employees produce larger quantities of lower-quality piece work

than equitably rewarded employees

Distributive Justice: The Perceived fairness of the amount and allocation of

rewards among individuals.

Procedural Justice: The perceived fairness of the process to determine the

distribution of rewards.

Expectancy Theory (Victor Vroom)The strength of a tendency to act in a certain way depends on the strength of an

expectation that the act will be followed by a given outcome and on the

attractiveness of that outcome to the individual.

Expectancy Theory RelationshipsEffort–Performance Relationship: The probability that exerting a given amount of

effort will lead to performance.

Performance–Reward Relationship: The belief that performing at a particular level will

lead to the attainment of a desired outcome.

Rewards–Personal Goals Relationship: The degree to which organizational rewards

satisfy an individual’s goals or needs and the attractiveness of potential rewards for

the individual.

Applying Theories in Organizations

According to Sarah Halliforde and Steve Whiddett, the motivation theories can be

applied in the organizational context in the following ways:

Organizational Level:

Designing new jobs and designing jobs around individuals

How and what an organization communicates

Design and delivery of Reward Systems

Career development and succession planning

Organizational change (preparing for change and managing the change).

Group and Team Level: Managing permanent, temporary and virtual groups and

teams.


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Individual Level:

Objective setting (annual and short term objectives)

Maintaining effective performance

Managing under-performers.

Traditionally companies have made very naïve and simplistic methods to try and

motivate their employees, which are essentially based on “Greed or Fear”. To list a

few :-

Carrot & Stick Approach: This method simply tries to alternate between a 'pull'

and 'push' mechanism to drive employees. A threat of dire consequences (a stick) is

used to push employees to perform, while incentives are used to pull people (carrot)

towards the performance objectives. The fallacy of this approach lies in the fact that

the 'carrot' and the 'stick' become the objectives themselves rather than the

motivation thus creating an incongruous performance management atmosphere.

Pay Based Motivation: Many large corporations all over the world believe salary is

the prime motivation for all employees. This is evident in the pay structures where a

component of salary is made dependent on the extent to which company objectives

are achieved (e.g. bonus programs, variable pay components, etc.). Though pay is

important for employees, not all find it to be the primary motivation especially if

money is not a basic constraint. Use of monetary rewards could cause some people

to demand more and more pay which may not be commensurate with the increase in

value they deliver to the company, or, others who do not value money as much

would simply become indifferent. This concept draws from the Valence theory

proposed by Vroom.

Reducing Time at Work: Many companies consider providing off-hour recreational

activities as a valid motivation factor for work. Herzberg considers this to be

ineffective and superfluous based on his researchvii.

Soft Skills Training: Again, Herzberg's research shows that training employees in

Sensitivity, Communications, Human Relations, etc work more as a hygiene factor

which facilitates tasks within a limited scope but largely does not motivate the

employees.

vii Manage People, Not Personnel – Motivation and Performance Appraisal, HBR, Chap -4, p-52 'One More Time: How Do You Motivate Employees?' , Frederick Herzberg.


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The Indian Context

The context of application of all the theories is of highest importance as the cultural

and societal environments have large impact on how the theories are perceived and

implemented. In many of the oriental part of the world saying anything against the

boss’ decision even in the interest of the company may tantamount to blasphemy

and the individual doing so may loose all collegial acceptance. Hence such person’s

performance can’t obviously be analyzed with the set of theories that have their

moorings in the occidental world.

The Indian business is in transition; it is moving from its socialistic structure to more

capitalistic structure and adopting the westernized model of business at a fast pace

at least in the knowledge industry. Hence even though the words and practices that

Indian businesses talk and follow are similar to the Western world their meanings and

goals may be different.

Meaning & Application of performance and Motivation TheoriesThe performance and motivation in Indian context till the entry of American multi

national organizations was rooted in socialistic mode of thinking. Even though in the


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days before the 90’s decades individual good was pursued, it was done covertly. The

“chalta hai” attitude as described in the paper on motivation and performance in

developing economies by Kanungo et. Al. describes the conditions that prevailed. The

circle of control was considered minimal with fatalistic attitude of the industry circles.

This slowly started changing with the opening up of the economies in the 90’s and

the introduction of competition where the performance or perish became the word to

run businesses by. Hence the attention shifted on the performance and its driver the

motivation. The Indian companies have slowly moved from “Theory X and Theory Y”

to “Two Factor Theory” to “Social Information processing Model” and are currently

experimenting with “Equity theories” and “Job Design Theory” to gain the desired

results.

Most of these companies used similar mechanisms to motivate employees thus pre-

empting the possibility of employees jumping from one company to another. The

mechanisms used to drive performance in such companies are:-

(a) Variable Pay: based on Individual performance and Company Performance

(b) Stock Options: This was an attempt to bring about a sense of ownership towards

the company thus eliciting better performance.

(c) High Salaries: The average salaries in the IT industry in India are way above the

salaries in other industries.

(d) Involvement: Knowledge Industry companies make a concerted effort at

information dissemination. Information about how the efforts of a particular team

affects the business of the company or of the customer is fed back to the team to

make their work seem more meaningful. This was an attempt at Job Enrichment

for the Knowledge Workers by feeding back the appreciation and complaints of

the customers in order to make the employees' feel the tangible results of their

efforts.

(e) Performance Appraisals: Many companies believe in only highlighting the

positives of the employee and downplaying the faults. This type of an appraisal

was used due to two reasons – the first was to reduce the possibility of the

employee getting dissatisfied and leaving an the second was a belief that the

positive feedback would motivate the employee such that eventually he would

overcome the faults anyway.

(f) Company Wide Recognition: Usually individuals are recognized for

extraordinary performance in a way, which is visible to the entire organization.

Not only does it increase the motivation of the person being recognized but also

motivates peers to strive for similar recognition.


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(g) Fringe Benefits: IT companies in India usually offer good fringe benefits such as

Medical Insurance, Company Cars, nice offices, foreign travel opportunities etc.

Learning from Application

The mechanisms used by Indian Companies to motivate knowledge workers have had

mixed results in achieving their goals. Some have been very effective while others

have become a burden for the company. To list some of the learnings:-

Stock Options: The explosion in the number of employees and the modification

of certain accounting rules in the US have made stock options inviable for most

companies. Many employees who have been granted stock options ostensibly

because it increases the commitment of the company towards the employee feel

that the psychological contract between the employee and the company has

weakened.

High Pay: The relatively high salaries in the Indian IT industry was earlier

possible because of a huge difference in pay levels between the developed

countries and India. With the IT industry slowing down and a salary growth rate

faster than in western countries, the Indian cost advantage is now reduced. The

rate and quantum of pay in the Indian IT industry seems to have reached a state

where, if it is kept stagnant the employees would get discontented and de-

motivated, while if it is increased, the competitive advantage of Indian companies

is endangered.

Fringe Benefits: Government regulations have identified the Fringe Benefits as

a healthy source of taxation. This has reduced the relevance and attractiveness of

the fringe benefits.

Involvement: This has been a sustainable & successful motivation factor in the

Indian IT industry. Previously employees would work on small bits of a project

without seeing where it fit into the 'big picture'. This not only caused the work to

seem academic and theoretical but also made the engineers & researchers make

wrong assumptions about the customer scenarios thereby reducing the relevance

of their work that resulted in a feeling of ambivalence towards the job. With

better information flow between engineering teams, research teams and the

customers the employees feel that they actually make a difference and also make

better judgments about customer scenarios. Ultimately it results in employee

motivation leading to better solutions for the customers.

Company Wide Recognition: Since most knowledge workers feel a need to be

recognized for their cognitive abilities, such recognition programs which improve

their prestige among a peer group has an effect of establishing a goal which


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prompts both the person getting recognized as well as others in the group who

strive for the recognition.

Apart from these the companies have also come to realize that high salaries certainly

act as a mental barrier against switching the job. During the initial years it acts as a

motivator too; however, after a couple of years, it loses its motivating value. The

intrinsic motivation works better with people who have good emotional quotient. It

does not work with people who are insensitive and disinterested people. The intrinsic

motivation instills a healthy level of competition among the employees that leads to

superior performance. The employees are somewhat averse to the extrinsic

motivation techniques. They feel that it creates a suffocating environment in the

organization, since they feel constantly being evaluated. But from the management’s

perspective extrinsic reward system helps standardize the employee behavior and

fosters good performance.

Communication is the key: However much the organization tries to create a

motivating environment, if the employees do not perceive the same, all is waste.

Hence, the organizations must spend effort in aligning the perceptions of the

employees with that of the organization.

Future Direction and some SuggestionsThe Indian cultural and social context is made up of varied hues. The peoples of

“Indian subcontinent” are followers of different faiths, have varied value system,

speak different languages and perceive things differently. The common trait across

these peoples may be strong ties to family, large but declining emphasis on the

acceptance by society. Hence as it is said “different strokes for different folks” the

key to having successful motivational and performance processes in Indian

“knowledge worker” context is to

1. make concerted efforts towards understanding each employee’s preference of

motivators. This would require higher effort from the Human Resource (HR)

departments initially but would result in ensuring that organization provides the

right kind opportunity for every employee thus making employee perform better

and stay with the company even if he was offered a higher monetary pay

elsewhere – which at least at present has become the hygiene factor rather than

the main motivator for many of the experience hires.

2. stop treating people as tradable capital as in the days of industrial era


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3. make organizational processes like performance appraisal and promotion

processes transparent to keep pace with changing times

4. Walk the talk rather than talking the talk and to understand that it is imperative

for the system to function by rules than by exceptions as we see in most of the

day to day life

5. provide long term vision for the sustainable growth and learning for the employee

rather than work for the next day so that the employee doesn’t feel insecure each

and every day

The above are not big challenges as long as the company is small in size. The

cultivation of strong interpersonal relationship with the employees can help motivate

them. But as the organization grows, one cannot count on these good intentions

alone. Hence, in addition, the organization must design reliable and comprehensive

systems in the workplace to help motivate employees. For example, establish

compensation systems, employee performance systems, organizational policies and

procedures, etc., to support employee motivation. Also, establishing various systems

and structures helps ensure clear understanding and fair treatment of employees.

It is important that the people who are in the roles of motivating others are

supremely motivated before he can expect his subordinates to be. Because in many

cases, the “boss” is the organization for the employees and hence, they look up to

him as a role model.

Nothing substitutes spending time with the employees at work. Managers must

frequently review the employees’ work and provide constructive feedback and

appreciation. This makes the employee feel that he is doing something worthwhile.

The fresh graduates joining the IT companies are practically neglected. The

managers do not provide enough attention to them. This is an unfortunate

phenomenon, since it might instill a wrong perception in the young minds that will

stay through the rest of their career, as suggested in the article, “Pygmalion in

Management” by Prof. Ravi Kumar.

The job performance is a function of the employee’s ability and motivation. Our

observation is, in the Indian IT industry, the ability of the employees is generally not

a problem at all. The job attitude makes all the difference. Hence, the role of

motivation in the IT industry is very relevant and pronounced.


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Also, in the Indian Context, given the high salaries drawn by the IT sector employees

compared to that of the other sectors, money is predominantly a hygiene factor and

not a motivator. Hence, organizations must spend more time and effort on motivating

through work content and culture.

References

Managing in the next society – Peter DruckerManaging in the 21st Century – Peter DruckerManaging the Organization – Peter Drucker

http://www.accel-team.com/motivation/index.htmlManagement of personnel in Indian enterprises by Prof N.N. ChattarjeeRole of motivation in performance, HBR Press

vi http://www.ifm.eng.cam.ac.uk/dstools/paradigm/vroom.html


http://www.accel-team.com/motivation/index.html

performance and motivation - summary of theories and application to indian it worker

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psychological

high salaries

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task significance

stock options

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