Motivation (Edexcel GCSE Business)

Revision Note

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Written by: Steve Vorster

Reviewed by: Jenna Quinn

The Importance of Employee Motivation

Motivation refers to the inner desire or willingness that propels a person to take action and achieve a specific goal or outcome
- Motivation can be intrinsic, coming from within a person (values, beliefs etc)
- Motivation can be extrinsic, coming from external factors (rewards or punishments)
Motivation plays a critical role in a business's success, and can have a significant impact on productivity, reliability and loyalty of the workers, and labour turnover rates

1. The impact of motivation on productivity

Motivated employees are more productive and efficient as they are more likely to be engaged in their work and take initiative in order to meet or exceed their goals
They will generate higher levels of output and quality
Increased productivity results in higher profits for the business

2. The impact of motivation on the reliability of workers

Motivated employees are more likely to be reliable and dependable
They take pride in their job, show up on time, meet deadlines, and take fewer sick days
This leads to increased trust between the business and its employees and higher productivity

3. The impact of motivation on turnover rates

Motivated employees are more likely to stay with the company long-term which reduces the turnover rate
Lower turnover rates reduce the need for costly recruitment and training

Financial Incentives to Improve Performance

Financial incentives are rewards or payments given to employees in return for their labour - or improved performance

2-5-4-financial-methods-to-improve-motivation

Types of financial incentives used to motivate employees

There are different theories of human motivation which offer varying perspectives on the role of money in motivating staff
- Herzberg's Two Factor Theory says that money is not a motivator, but lack of it leads to dissatisfaction
- Maslow's Hierarchy of Needs argues that people move through levels of needs that motivate them - their first need is physiological (food, water, clothing), followed by safety (employment, shelter etc) - once a need is met it no longer serves to motivate

An Explanation of the Financial Incentives Available to Businesses

Incentive Type	Explanation
Remuneration	This refers to the basic wage or salary that a worker receives for their labour Employees who work on an hourly rate are paid wages Salaries are paid to full time staff and usually accompanied by benefits
Commission	A percentage of sales revenue paid to workers who sell products or services Commonly used in sales roles and motivates staff to sell more and increase their sales revenue
Bonus	An additional payment given to staff as a reward for achieving specific goals, completing projects on time, or exceeding performance expectations The opportunity to earn more money may motivates staff to work harder and achieve better results
Promotion	Promotion usually demands a higher level of responsibility from an employee in the job role Higher pay is usually offered to reflect the increased responsibility A clear promotion pathway can act as a motivator to improve productivity and staff performance
Fringe benefits	These are additional benefits usually offered to salaried employees and include benefits such as a company car, private healthcare, gym membership etc. Employees can be motivated to work hard in order to keep their job and the associated fringe benefits

Non-financial Incentives to Improve Performance

Non-financial incentives are rewards or motivators not directly related to money
These incentives are usually intangible and include methods that lead to recognition, praise, job satisfaction, and work-life balance

Types of Non-financial Incentives

Incentive Type	Explanation
Autonomy	Involves giving staff the authority and resources to make decisions and take action without first receiving management approval Increases staff sense of ownership and responsibility, leading to improved productivity Gives employees a sense of ownership and control over their work, which can lead to improved productivity, especially for skilled workers
Job enrichment	Involves adding more challenging or meaningful tasks to a job Staff feel more motivated and engaged, leading to improved productivity
Job rotation	Involves moving staff between different roles in the business Exposes staff to new challenges and experiences which can increase motivation, understanding and skill

Examiner Tip

When you are asked to consider an appropriate compensation package that a business is wanting to offer, there are several factors you should consider before answering:

The context of the business: Is it a manufacturing facility or a team of creative designers? The former would probably pay their workers wages and not offer any fringe benefits, while the latter would pay salaries (plus possible bonus) and offer fringe benefits.
The balance of the compensation package: ideally it should include appropriate financial and non-financial incentives in order to maximise employee productivity and retention.

Last updated: 21 October 2024

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