Past Examination Papers Organisational Behaviour E

Examination
Essay Questions

Essay Question 1

What do we mean by motivation'? Examine Abraham Maslow's theory of motivation showing

how it may be used in a business context. Comment on the criticisms which have been
made of the theory.
(60 marks)

Essay Question 2

Identify and comment on the factors which contribute to low creativity in work groups.
Discuss the techniques that managers might use to encourage work groups to be more
creative.
(60 marks)

Essay Question 3

In Organisational Behaviour terms how may rewards be classified? Consider the ways
companies can distribute rewards and compare and contrast the newer pay practices
available to companies.
(60 marks)

(Total 180 marks)

END OF PAPER

Solutions
Note from the Examiner: These answers are skeletal guidelines only. Though they contain
the major points sought, the student's response should provide further insight into many of
the points. Simply repeating the major bullet points does not necessarily demonstrate the
required level of understanding of the subject.

Solutions to Essay Questions

Essay Solution 1

What do we mean by motivation'? Examine Abraham Maslow's theory of motivation

showing how it may be used in a business context. Comment on the criticisms which
have been made of the theory.
(60 marks)
Answers should include the following.
Human behaviour rests on the basic concepts of needs and motives. A need is an
experienced state of deficiency that pushes our behaviour in a given direction. Examples of
needs are hunger, thirst, and belongingness. A motive pulls one's behaviour in a predictable
direction. For example, you may need a pay rise to cover the cost of your summer holiday.
You begin to work harder at your job with the knowledge that pay rise decisions will be made
four months before your scheduled summer departure. You come to work on time, avoid
taking sick leave and work more closely with your colleagues. You engage in all of these
behaviours with the hope that they will trigger a rise. Your behaviour is thus pulled in the
direction of your increased performance motive.
Work motivation is referred to as the direction, level of effort and persistence evident in the
behaviour of an employee. The direction of behaviour refers to which behaviour an
employee chooses to perform a task in the organisation. For instance, an engineer chooses
to consult with his project leader concerning rising design costs for a new product option.
The level of effort component of motivation is how hard the employee will work to perform
the behaviour chosen. For instance, if the engineer prepares a written analysis and empirical
evidence of rising costs in the design project, he is working much harder than if he simply
mentions his concerns to his project manager over an informal lunch. The level of
persistence refers to the employee's tenacity in the face of obstacles to performance and
goal accomplishment. For instance, when the project manager disagrees with the engineer's
cost analysis, does he give up or does he refine his analysis with better assumptions about
expenditures?
Low motivation does not necessarily cause low performance. An employee may have skills
and abilities in such abundance that his high performance is assured inspite of his motivation
level. Managers who always assume that poor performance is a result of low motivation risk
taking the wrong steps to correct performance problems in the workplace. For instance, they

may overlook the pivotal role of training and development, better equipment and technology,
and excessive centralisation of decision making as primary causes of performance
problems.
Maximum 8 marks
There are different types of motivational theories. These are classified as content and
process theories of motivation. A content theory of motivation specifies those factors in
individual employees and their work environments which stimulate, direct, sustain, and stop
their behaviour. A content theory of motivation answers the question: What specific needs
cause motivation?' A process theory of motivation explains how behaviour is stimulated,
directed, sustained, or stopped. Process theories explain how motivation occurs. Both types
of theories offer information which can be applied to the problems of motivating employees.
One content theory of motivation is Maslow's hierarchy.
Abraham Maslow believed that motivation could be explained by organising human needs
into five levels. He formulated his motivation theory to address human behaviour in all
settings. His theory was quickly applied to the narrower range of human behaviour in
organisations. Along with definitions and organisational examples, the five levels of Maslow's
hierarchy are:
Self actualisation and personal growth
Ego and self-esteem
Social satisfaction, belongingness
Safety and security

Psychological needs (higher order needs)

Air, water, food, reproduction

Physiological needs (lower order needs)

Physiological needs are the lowest level of needs in the hierarchy; they include food
(hunger), water (thirst), shelter (warmth), and sex (reproduction). In today's world these
needs rarely dominate us. Real hunger (starvation) in developed nations is rare. Mostly our
first-level needs are satisfied. Only an occasional experience of a couple of days without
sleep, a day on a diet without food, or a frantic 30 seconds under water reminds us that
these basic needs are still with us. As Maslow notes, physiological needs are basic to our
biological survival and are therefore dominant over psychological needs. Therefore,
physiological needs are often referred to as lower-order needs. Maslow states that
physiological needs must be satisfied first. For example, your concern about a business
meeting will abruptly disappear if you arrive home to see your house in flames. Your
motivational focus will shift dramatically to saving your family.
Safety needs are also called lower-order needs and they are activated next. These needs
relate to protection against danger, threat or deprivation. Once their physiological needs are
met, people want guarantees that their safety needs will be satisfied too. Economic and
physical security are generally embodied in these needs. Safety needs are tied strongly to
physiological needs because meeting safety needs ensures continuity and predictability for
fulfillment of the basic needs.
Maximum 15 marks

Looking at examples of employee behaviour helps us to answer the question; do safety

needs affect employees' action? One market researcher provides for his continued
employment by joining a professional group meeting once a month to discuss new trends in
market research for new products. This individual becomes prominent in the association and
other professionals come to seek his advice on market research for new products. A second
employee fulfils the same job security need by attending a course in marketing research at
the local university. Because the company's goal is the development of new marketing
procedures, both employees try to help achieve the goal through different behaviours.
Belongingness needs represent the third level of Maslow's hierarchy. This complex set of
needs covers the desire to give and receive affection, desire to express friendship, altruism,
the value of group acceptance, and giving and receiving emotional support. The
belongingness need level demarks the beginning of higher-level needs which were
considered by Maslow to be personally infinite, i.e. you can never satisfy them completely.
Higher-order needs are learned; we are not born with them, and they function at the
psychological level. People develop them through sustained contact with their social
environments.
Esteem needs represent the fourth hierarchy level. It has an external component identified
as social status, which is defined as recognition, prestige, and appreciation from others. The
internal component of the esteem need consists of challenge, autonomy, and self-reliance.
Employees usually experience the internal component as personal feelings of control over
work. When work does not adequately meet this need, employees describe their work as
monotonous or mind-numbing. Work which activates these reactions can lead to job
dissatisfaction and low performance. As employees become more competent on the job,
they often experience enhanced self-efficacy. Self-efficacy is defined as personal confidence
to achieve a very high level of performance. Often called the can do trait, it is strongly
reinforced in employees who have high self-esteem. Recognition on the job and approval
from peers, managers and executives can all contribute to self-efficacy and social status.
Self-actualisation is the final level of the hierarchy. This need is defined as the desire to fulfil
oneself by making maximum use of talents and experience, in other words, living up to one's
potential. People sometimes describe it as their desire to fulfil their potential through the
activities they pursue. As noted for esteem needs, self-efficacy is also strengthened by
success in self-actualising on the job. Self-actualisation can occur in many other life settings
than work. Similarly, many jobs do not provide employees with much opportunity to selfactualise on a regular basis. As a result, employees quickly learn to satisfy this need outside
the job. Managers should take note of this tendency and address themselves to improving
the design of work to provide more opportunities for employee self-actualisation.
Maslow's hierarchy assumes that physiological needs must be satisfied before higher-order
needs can be satisfied. There are several other points which are crucial to a complete
understanding of Maslow's hierarchy, as follow:
1. A satisfied need ceases to motivate behaviour at that level. When an employee
decides that he has sufficient insurance coverage for himself and his family, part of
his security need is met.
2. Unsatisfied employee needs lead to undesirable outcomes at work. Unsatisfied
needs create perceived inequity for employees. When this condition persists,
employees experience job dissatisfaction and they respond by reducing their
performance, coming to work late, not coming to work at all, or leaving.
3. People are assumed to have a need to grow and develop their full potential, and
consequently, they strive to move up the hierarchy and satisfy higher-order needs.

All human beings self-actualise in some way. However, only some employees selfactualise on the job.
4. Needs are not usually satisfied completely. Individuals can satisfy more of their lower
order needs that their higher order needs. In organisations lower order needs are
satisfied largely by monetary rewards. In contrast, higher-order needs are satisfied
by social interactions (to meet social and ego needs), and by the design of
meaningful jobs (to meet self-actualisation needs)
An application of needs theory can be seen in employee career issues. For instance, early
career stages are characterised by security concerns and learning organisational values.
After five years or so, employees' concerns shift to the establishment of a professional
identity in the firm and in the chosen profession (external component of ego need) and
autonomy (internal component of ego need). Self-actualisation needs soon materialise as
employees strive to attain their full potential at work.
Senior employees may make organisational contributions which will endure after they leave.
Executives might become mentors or sponsors for younger employees who show
exceptional capacities for noteworthy careers in the organisation. Being a mentor can be a
particularly rewarding self-actualising pathway. Other employees start their own business so
they can obtain more autonomy. Becoming an entrepreneur can sustain self-actualisation
because it reinforces the human desire for self-determination. Experiencing more selfdetermination has important effects on the esteem need. For instance, great success in
one's career leads to greater satisfaction of the internal component of the esteem need and
enhanced intrinsic motivation.
The theory makes it clear that unmet needs are more motivating than needs which have
been satisfied. The implication is that motivation and need satisfaction are anticipatory in
nature. Much of employee job satisfaction is based on the belief that future job situations
have great potential for meeting higher-order needs. Managers must seek to guide and
direct employee behaviour that meets organisational needs and individual needs
simultaneously. The quality of an organisation's motivational programme is determined by
the clarity of pathways between employee performance and rewards which satisfy lower and
higher-order needs.
Maximum 25 marks
In relation to criticism of the theory data from research on two different companies suggest
that the hierarchy of needs can be reduced to two levels. The research suggested that a
physiological level existed separately from a second hierarchy which included all the other
needs. Researchers have also found that as managers advance in an organisation, their
needs for security and safety decrease, with a corresponding increase in their social, esteem
and self-actualisation needs. Research studies also indicate that while lower-order needs
become less important as they are satisfied, there is no decline in the importance of higherorder needs as they are satisfied. In other words, employees will strive for status and
autonomy in their work even after experiencing considerable success in these need areas.
In summary, strong evidence supports the view that unless physiological needs are satisfied,
the higher-order needs cannot come into play. As employees move through their careers,
their need patterns shift to consideration for higher-order needs. In early career stages,
employees focus on job security and on developing an accepted position in the organisation,
i.e. social needs directed to belonging. By near mid-career, their attention begins to shift to
recognition, autonomy, and self-development.
Maximum 12 marks

Essay Solution 2

Identify and comment on the factors which contribute to low creativity in work
groups. Discuss the techniques that managers might use to encourage work groups
to be more creative.
(60 marks)
Answers should include the following.
Research evidence suggests that groups are no more risk-oriented than individuals making
decisions alone. Researchers conclude that groups take risks or are cautious depending on
how members value risk in particular decisions. For example, if new product development
team is deciding to scrap a traditional product design, the chances are good that the group
will be very risk-oriented. Product development personnel are supposed to support new and
innovative product designs, so a penchant for risk in such groups would not be unusual. On
the other hand, if a group of physicians make a decision to request more diagnostic tests for
a very sick patient, they will often choose the medical intervention which is least invasive and
most conservative. Physicians believe in the principle of first do no harm; therefore, their
group decision is likely to be conservative.
In general, when group decisions entail issues of employee morale, termination, lay-off, or
other human resources policies, the decisions reached by groups are usually conservative
and risk-avoiding in nature.
Factors which contribute to low group creativity are:
1. The group has no common goal or core focus.
2. No standard method of making decisions is followed.
3. The process of generating ideas is not separated from the evaluation of ideas.
4. Ideas are not evaluated on their own merits. They are evaluated in terms of which
group members suggested them.
5. Ideas do not become the property of the group once they are suggested.
6. Conclusions are an individual product instead of a group product.
7. The group does not perceive members' time as a valuable and scarce resource.
8. Some members do not feel sufficiently at ease to participate and submit their ideas
(they fear derision or reprisal).
9. Some members dominate or deflect the group from its stated purposes.
The list is rather long. It may seem to imply that there is little hope for creativity in work
groups. This is hardly the case. Managers have several means to encourage creativity.
Maximum 20 marks
Brainstorming

This technique has been in existence for many years and it continues to prove useful for the
creative generation of alternatives in work groups. The fundamental principle of
brainstorming is the separation of idea generation from idea evaluation. All groups tend to
evaluate the first suggestion made by a member. Brainstorming simply delays such
discussions indefinitely. This is the principle of deferred judgement. By employing this
principle, the group can generate many possible solutions, effects and outcomes without
becoming bogged down in criticising suggestions. The steps for a typical brainstorming
procedure are noted below.
o Assemble the work group and appoint a session leader (not necessarily the manager

or supervisor, but perhaps someone with special knowledge of the problem).

o Explain the focus of the session. Define the purpose and/or problem (ideas,

strategies, solutions, alternatives, etc.).

o Set a time limit for the session.
o Select a recording method (flip chart, video taping, blackboard, direct wordprocessing input to a computer).
o Review the rules of brainstorming, noted below.
a. Break down complex problems into problems specific enough to be
brainstormed. Instead of How can we promote a new product?, use three
separate problems: How can we promote a new product to 1) the retailer, 2)
the trade, and 3) the consumer?
b. Any suggestion or idea can be proposed by any member at any time.
c. Ideas must be generated as quickly as possible.
d. Use ideas already suggested to spawn new ones.
e. Criticisms or evaluations are not allowed during the brainstorming period.
f. Lengthy explanations or discussions are to be postponed.
g. The more suggestions the better.
h. The session runs for the allotted time or until no more ideas are forthcoming.
i. Idea evaluation is separate from and follows idea generation. The work unit
becomes responsible for taking the recommended action on the best ideas
and reporting results back to the brainstorming group.
j. Do not use brainstorming as a substitute for individual thinking. It is a
supplement.
Brainstorming is a technique for generating ideas: not for evaluating them. It generates lots
of ideas quickly. Further, it does not require accountability so creativity is more abundant and
less inhibited. It is particularly applicable in advertising, new product development,
production process changes, and complex decisions about managerial information systems.
Maximum 10 marks
There are also variations on the brainstorming methodology shown above. In stop-and-go
brainstorming, short periods of brainstorming (ten minutes or so) are interspersed with short
periods of evaluation. With large groups, the Phillips 66 technique can be used. Once the
problem is clearly understood, small groups of six brainstorm for six minutes. Then a
member of each group reports either the best ideas or all ideas to the larger group. Reverse
brainstorming brings fresh approaches by turning the problem around, for instance: How
could we lower productivity? How could we decrease morale? What can we do to stifle
creativity?
Maximum 6 marks
Nominal Group Technique (NGT)

This method structures the work group's creative process to minimise verbal interaction
among members. The group, usually no larger than nine, follows a highly structured
procedure which is briefly described below:
o The question under study is posted in front of the group who members silently

o
o

o
o

generate ideas in writing without looking at the work of others or discussing the
question
The leader goes around the table and asks each participant to read one idea from his
or her notes. This idea is recorded in some way (computer, flipchart, video tape,
etc.). In a round-robin fashion, all participants present their ideas for recording until
all are shown.
Each idea recorded is discussed in the order it appeared. The leader reads each item
and asks the participants if there are any questions or points needing clarification.
Each member records the ideas on 30 50 cards and rank orders them secretly from
1 to n. The mean average rankings are used as a basis for the group's decision.
The NGT process can end here or the decision may be refined through discussion
and revoting.
The voting patterns can be analysed and reasons examined to see if more accurate
decisions can be made.
A final vote is taken in the same way as in step 4. This vote closes the decision loop
so members experience closure to the NGT process.

Maximum 6 marks
The NGT has advantages over more common and less disciplined group problem-solving
methods. First, idea generation is separated from idea evaluation. Second, balanced
participation occurs and the effects of dominant individuals on group decision-making are
lessened. Third, it ensures the systematic movement towards the aggregation of votes to
determine a preferred outcome. Fourth, a group in any stage of development can use NGT.
It is time efficient and members find the process to be satisfying.
On the negative side, the NGT is highly formalised and its repeated use can lead to member
perceptions of ritualistic decision-making. Second, groups with stable membership find the
technique effective as well as new groups or project groups. Lastly, the group's formal leader
must develop a norm which encourages a systematic approach to group creativity so as not
to suppress participation.
Maximum 6 marks
Delphi Technique
This method can be used to make group decisions when members cannot attend a meeting.
It is a method for gathering systematically written judgements from members using a set of
sequentially modified questionnaires interspersed with summaries of results from previous
rounds of information gathering from members. The technique was developed by the Rand
Corporation as a way of forecasting future events of national and international importance .
The technique takes considerable time and effort to complete. In using it, members of the
group may not know the other group members and it requires a central co-ordinating
mechanism to manage the alteration, transmission, and summarisation of questionnaire
data. The Delphi technique follows these steps:
o Each

group member independently and anonymously

suggestions, and solutions to the problem facing the group.

records

comments,

o All the data generated in step 1 are sent to a centrally located individual who is

responsible for data compilation and reproduction

o Each member receives a copy of all written comments from other members.
o Members generate feedback on other members' comments, and all second-round

feedback is written down and sent to the centrally-located individual.

o Steps 3 and 4 are repeated as many times as necessary to reach consensus.

Evidence indicates that Delphi groups can be more effective than groups which do not follow
a disciplined problem-solving procedure. It has been found that average performance was
higher for Delphi groups than for undisciplined groups both working on a comparable
problem-solving task.
Delphi groups eliminate the effects of dominant personalities on group decision-making.
They also eliminate the effects of perceived member status on group decision-making.
Lastly, Delphi groups are quite different from nominal groups as Table 6.7 shows.
Maximum 6 marks
Delphi Groups Differ from Nominal Groups. Delphi groups are composed of members who
are unaware of other groups. Delphi groups are made up of members who never meet faceto-face. They are reliant on a central processing unit which collects, collates and feeds back
information.
Nominal groups are composed of members who know each other. These groups are
designed to reach a decision more quickly and they are more likely to have status and
dominance effects.
Maximum 6 marks

Essay Solution 3

In Organisational Behaviour terms how may rewards be classified? Consider the ways
companies can distribute rewards and compare and contrast the newer pay practices
available to companies.
(60 marks)
Answers should include the following.
Rewards can be classified into intrinsic and extrinsic rewards. Intrinsic rewards are
associated with the job itself. Work with high intrinsic value includes judges, doctors, design
engineers and architects. The duties which fall into this category involve varied and
significant work skills. Some examples are:
o being personally responsible for a meaningful part of the work
o carrying out duties which lead to personal development and competencies

o being part of an important information network

o having multi skilled duties

Extrinsic rewards are not connected with job content but are given to employees by
supervisors, peers, work groups and external organisations such as trade unions. Extrinsic
rewards are associated with short cycle time jobs and limited to behaviour specific to the job.
Extrinsic rewards can be broken down into direct compensation, indirect compensation, and
non-financial rewards. Examples are:
o salary, bonuses, performance related pay, profit related pay, share options and

pensions (direct types)

o loans, company car and health insurance (indirect types)
o large offices, assigned parking, insignias and titles (non-financial types)

Rewards strongly influence employees' effort and performance levels. Equity theory shows
how employees at all levels compare their efforts and rewards to the efforts and rewards of
other employees. Any perceived inequity of these will lead to levels of dissatisfaction and
demotivation. How the rewards are perceived can easily outweigh the actual rewards
distributed by the organisation. Expectancy theory of motivation also impacts on the
employees' perception of rewards. If the employee perceives a weak link between
performance and rewards then the rewards will not function as motivators. Correctly
classifying organisational rewards can safeguard against turbulent and inaccurate employee
perception of rewards.
Behavioural scientist have proposed that intrinsic rewards are more important than extrinsic
rewards in influencing motivation and performance. Studies have found that intrinsic rewards
can undermine extrinsic or vice versa. These investigations show the importance of
separating the types so that one cannot contaminate the other when causes of
dissatisfaction are being investigated. There seems to be greater motivational value in
building as many rewards as possible into the job itself (intrinsic rewards ). For example
involving employees in goal setting will lead to valued intrinsic and extrinsic rewards. Finally
organisations have much more control over extrinsic rewards. How rewards are distributed
can be communicated in a published policy statement. This can reinforce the company
culture and define the relationship between performance and rewards.
All organisations are interested in the effective distribution of extrinsic rewards. A variety of
guidelines for distributing rewards have been developed by organisations. The common
factors that organisations use to distribute direct compensation are:
Performance
Assessing the performance or absence of performance occupies numerous
people in any organisation. When rewards are allocated on this basis, then
performance becomes a motivator. The discussion on the design of performance
appraisal systems focused exclusively on this important relationship.
Maximum 15 marks
Effort
In the interest of minimising turnover and hiring costs, organisations frequently
decide to reward effort. This is often done to prevent new employees from

experiencing job dissatisfaction. Frequently managers reward effort in the hope

that effort and potential will eventually be followed by actual performance. This is
a non-performance-contingent basis for allocating rewards. If the practice is
widespread, high performers may experience reduced satisfaction with pay
because they believe the organisation is neglecting to reward their proven
abilities to produce.
Seniority
Length of service is used to group employees for the purpose of making human
resource decisions about such matters as amount of fringe benefits, eligibility for
job change and transfer and redundance. When seniority becomes a substitute
for performance in the allocation of rewards, the organisation soon learns that it
is encouraging tenacity versus performance and achievement. This of course
eliminates perceived equity for high performers. They leave the organisation in
due course and the ranks of the mediocre performers increase.
Downsizing and re-engineering changes in organisations are undermining the
significance of seniority as a basis for distributing rewards. Since organisations
are using more contract workers and temporary workers who may be employed
only as long as it takes to complete a project, seniority is rapidly fading as a basis
for pay rises and incentive distributions. Weakened labour unions whose workers
return to work without forcing concessions on managements also weakens the
role of seniority in compensation decisions. These threats to seniority-based
reward systems will not abate because large, global companies can easily shift
production away from facilities that are experiencing strikes to those facilities that
are not.
Equality
This policy of compensation means that employees at given organisational levels
receive the same base pay and pay rises. Such arrangements are common in
partnerships where the managing partners agree to equal salaries. To some
extent, companies that value highly collaboration and co-operation also extol the
virtues of equality in compensation decisions. The belief is that giving everyone
the same pay rise will cause employees to support and advance teamwork.
School systems frequently adopt across-the-board pay rises for these reasons.
Power and Influence
Groups or individuals are able to increase their share of rewards at the expense
of other groups or individuals. This basis for rewards is closely related to seniority
and it is a focal concern to unions which wish to preserve their economic capacity
to influence employers' decisions. Most often, managements develop a reward
policy which blends the reasons noted above. This will lead to severe conflicts in
reward policies.
A Comparison of Company Pay Practices
Organisations are constantly experimenting with various pay systems. While
some of these approaches rest on solid motivational ground and research, others
are quite untested in these terms. We begin our discussion of these systems by
starting with newer pay systems which are backed by research conclusions. We

will end the section with a brief look at very new and untested pay systems which
are drawing the attention of researchers and managers.
Cafeteria-Style Fringe Benefits
In this system employees select a package of fringe benefits designed for their
individual needs. Also called flexible benefits packages, these programmes are
designed to match the demographic characteristics of an organisation's work
force. In the plan, management places upper limits on how much the organisation
is willing to spend on fringe benefits. Some employees take all of the fringes in
cash while others purchase specialised medical coverage and other benefits
consistent with their needs.
Lump-Sum Pay Systems
These plans allow employees to decide how they receive their pay during the
coming year. Plans range from weekly pay cheques to one large cheque at the
beginning of the year. The lump sum is treated as an advance which the
employee earns throughout the year with his labour. If an employee leaves the
job before year end (and has received a lump sum payment), the unearned
portion must be paid back to the employer. The lump-sum programme does
generate administrative problems and it is no system for organisations with cash
flow problems. However, such plans do give employees greater flexibility for
making salary investment decisions.
Skill-Based Compensation
They reward employees for learning new skills. These system provide pay rises
and bonuses for the number of new skills employees can master. This form of
compensation leads to a work force with greater skill levels and
interchangeability. Some organisations have adopted this approach while
preserving merit-based rewards which recognise achievement on the job. These
systems can lead to the creation of more challenging work which expands the
available intrinsic rewards. Skill-based compensation is playing a more important
role in organisations that are using self-managed teams to perform work. Teams
only become highly successful and cost effective if employees are thoroughly
cross-trained. To encourage the rapid acquisition of cross-member job skills by
employees in self-directed teams, organisations often use one-time bonuses to
reward employees who rapidly acquire the skills necessary to build a fully crosstrained self-directed work team.
Accumulating Time Off
The time-off feature is attractive to most employees. The concept is built into
most holiday programmes which use a formula to determine days off with pay
based on seniority. A variation of this programme would be a time-off reward
based on levels of job performance. Employees are allowed to accumulate timeoff credits. These credits can be turned in for time off with pay. Such
programmes can be applied without loss of product or service quantity or quality
17.
The All-Salaried Team

In many organisations, executives and managers are paid salaries while nonmanagers receive hourly wages. By paying all employees a salary, the
organisation hopes to improve loyalty, commitment and self-esteem in the work
force. Teamwork and cohesiveness are promoted by the practice of paying
everyone a salary. This pay system does eliminate some annoyances for
employees. For instance, time clocks can be eliminated and status symbols
become less apparent in the organisation. However, such pay systems may, over
time, cause a de-emphasis in innovation and creativity which are primarily
individual-based behaviours. This scheme reflects our earlier discussion of the
effects of across-the-board pay rises. Because the all salaried team concept
tends to reinforce teamwork and co-operation, some employees who wish to get
ahead by out-performing their colleagues may be put off by a pay system that
tends to ignore individual contributions.
Maximum 20 marks
Open-Salary Information
Pay secrecy can obscure the actual relationships between performance and
rewards. This effect was noted in Module 3 in our discussion of the managerial
implications of equity theory. If reasons for pay rises are poorly understood,
employees are likely to believe the pay system produces unfair results. In making
judgements about his pay in relation to others under conditions of pay secrecy,
the employee often underestimates his own pay relative to co-workers while they
often overestimate their efforts relative to co-workers. Further, they overestimate
the pay of their superiors and underestimate their rewards. Pay secrecy
exaggerates pay perceptions and creates the condition of chronic, perceived
distributive injustice. Managers may not want to make individual pay decisions
public, but open salary information can increase the motivation benefits of pay.
Open salary information usually involves publishing 1) ranges for pay rises, 2) the
number of pay grades, 3) organisational guidelines on the meaning of
performance levels, and 4) policies on bonuses and fringe benefits. Thus, opensalary information aligns employees' perceptions of pay fairness with accepted
relationships between performance and rewards.
Differences between New pay Practices

Pay practice

Employee advantages Organisational

problems

Design issues

Cafeteria-style
fringe benefits

Increased
satisfaction with
pay and benefits

Cost of
administration

Educated work
force that is very
diverse

Lump-sum pay

Increased
satisfaction with
pay, greater
visibility and status
of raises

Cost of
administration and
cash flow effects

Turnover rate, fair

rates

Skill-based
compensation

More flexible and

skilled work force,

Pressure to pay all

employees the

Open climate, fair

pay rates, portion

increased
satisfaction

same, complaints
about rises

of pay based on
performance

Accumulating time
off

Improved
satisfaction, links to
performance
appraisal system

Must have a good

performance
appraisal system in
place

Open climate, need

for improved quality

The all-salaried
team

Improved job and

pay satisfaction,
recognition
improved

Some employees
prefer hourly wage,
blurs link between
performance and
reward

Open climate,
emphasis on
teamwork, limited
use of piece-work
pay systems

Open-salary
information

Increased job
Time-consuming
satisfaction, greater
trust and
motivation, better
salary

Maximum 25 marks

Open climate,
dependable pay
brackets, pay
based on
performance