Motivation

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Exam code:J204

The importance of employee motivation

Motivation refers to the inner desire or willingness that drives a person to take action and achieve a specific goal or outcome
Motivation plays a critical role in business success

Employees are more productive and efficient

They are likely to be engaged in their work and use their initiative to solve problems
They generate higher levels of output and quality
Increased productivity results in higher profits for the business

Labour turnover rates are often lower

Motivated employees are more likely to stay with the company long-term
Lower turnover rates reduce the need for costly recruitment and training
Long-serving staff are likely to be productive and capable of delivering good customer service

Reliability and loyalty of workers are high

Motivated employees take pride in their work, show up on time, meet deadlines and take fewer sick days
This leads to increased trust between the business and its employees and encourages a positive organisational culture

The importance of employee retention

A high level of labour retention means that few staff are leaving the business during a given period
Retaining employees is important for several reasons:
- Workers are familiar with the business
  - Familiarity with business procedures and expectations is likely to mean workers are productive and efficient
  - Experienced workers are likely to provide good customer service
  - Managers can focus on core tasks rather than directing subordinates
- Lower costs of recruitment
  - Fewer expensive job advertisements need to be placed
  - Less management time is taken up in shortlisting, interviews and assessment
- Reduced need for training
  - Repeated induction training sessions can be avoided
  - Training can focus on the further development of existing workers, increasing their effectiveness

Examiner Tips and Tricks

Students often confuse labour turnover and labour retention. Labour turnover is the percentage of staff who leave a business over a certain period of time, while labour retention is the percentage of staff who remain with a business over a period of time.

Financial methods of motivation

Financial methods of motivation use monetary incentives to increase morale and encourage employees to work harder or more effectively

Explanation of financial incentives

Incentive	Explanation
Pay	Basic wage or salary that a worker receives for their labour Employees who work on an hourly rate are paid wages and accrue benefits such as annual leave according to the hours they work Employers pay full-time staff salaries, usually accompanied by benefits such as a fixed number of days of annual leave In some businesses, piece rates are paid to employees for each item produced Commission is often paid to workers in sales roles to motivate staff to sell more and upsell E.g. Staff at electrical retailer Currys receive a commission for each item they sell, with greater rewards for add-on services such as extended warranties
Bonus	An additional payment given to staff for achieving specific goals, completing projects on time or exceeding performance expectations The opportunity to earn more money may motivate staff to work harder and achieve better results E.g. British Gas offers generous bonuses to engineers who meet or exceed expectations related to customer service
Profit sharing	A business may decide to share a proportion of its profits with workers Employees are motivated by the chance to benefit from the overall success of a business Publisher Bloomsbury rewarded its employees with bonuses of around 6% of their salary following outstanding business performance in 2022
Fringe benefits	These are additional benefits usually offered to salaried employees Fringe benefits could include the use of a company car, private healthcare, a pension scheme or gym membership Employees are motivated to work hard in order to keep their job and the associated fringe benefits E.g. Dunelm Mill Ltd offers staff generous discounts on its homewares

Non-financial methods of motivation

Non-financial incentives are rewards that are not directly related to money
These incentives are often intangible and can include praise, award schemes or a good work environment

Explanation of non-financial incentives

Incentive	Explanation
Praise	Praise can be given formally or informally Managers often make encouraging comments about employees’ work on a day-to-day basis Appraisal meetings provide opportunities for praise to be formally recorded Workers who are praised are likely to feel valued, leading to greater commitment
Award schemes	Award schemes may take a variety of forms, including Employee of the Week or the distribution of prizes or certificates Formal recognition can increase employee confidence, leading to greater effort at work and loyalty
Working environment	Designing a safe, pleasant working environment can encourage a purposeful atmosphere amongst staff Physical features, which may include staff canteens, open-plan offices, leisure facilities and even free parking, can improve the workplace environment Businesses may also organise staff bonding activities, such as social events or charity initiatives, to improve business culture

Businesses commonly use a mixture of financial and non-financial methods to motivate workers
- This helps to meet the individual needs of different workers
- It also avoids wasting financial rewards on those for whom it would be unlikely to improve performance

Business GCES OCR