1. Background study

            Multiple factors impact the organizational behaviours of an individual at the workplace. These factors are the major contributors in shaping an employee’s professional productivity and performance. They propel the employees towards attaining certain goals and sustain themselves successfully in the organization. One of the critical factors germane to organizational attitude is “motivation”. It plays a pivotal role in attaining certain milestones in the professional journey of a person. The most significant impact of motivation is observed in terms of remuneration and its variation over time.

This paper discusses two effective theories of motivation which elaborate how remuneration shapes the motivational pattern of an individual. These theories are discussed in association with real-time examples of pay-motivation relationships.

2. What is motivation?

In general terms, motivation is the driving factor that stimulates an individual to achieve a certain target. Kast and Rosenzweig posit that “a motive is what prompts a person to act in a certain way or at least develop an inclination for a specific behaviour (Kast 1970)”. Yorks is of the opinion- “Motivation is defined as those forces within an individual that pushes or propel him to satisfy basic needs or wants” (Yorks, 1976). Three basic factors instill a sense of motivation in a person. These are- (a) an internal force which can act as inertia and drive a person towards useful action (b) The energy to perform a certain action and (c) a clear idea of the direction of action and the consequences (achievements in this case) (Ronald, 1990).

3. Some misconceptions related to motivation

There exist certain ingrained myths about motivation and employee satisfaction which a person needs to be aware of. These are discussed below-

1.      Very often the managerial bodies assume that material rewards (extrinsic rewards) are more effective in motivating an employee than non-material rewards (intrinsic rewards). Morse (2003) has identified this assumption as fallacious in his review of Chip Heath’s study of extrinsic and intrinsic rewards (Morse,2003).

2.     Manion pointed out that on various occasions the managers think that only the different forms of intrinsic (non-material) motivation work for all sections of the employees. This however is an erroneous assumption, since it does not take into account a combination of factors that trigger motivation (Manion 2005).

3.     The managers often believe that certain people cannot be motivated by any means. But sometimes these managers fail to comprehend that not all employees will have the conventional “job-oriented” motivational pattern.  A deeper probe is necessary on the part of these managers to investigate the actual triggers that may influence these sections of the employees.

4.     The most fallacious and illusive concept of motivation as nurtured by the management section is that “money” is the sole motivator. Although in most cases this is true, but Atchison has rightly pointed out that an incredibly high compensation may demotivate an employee instead of stimulating him. In such cases, the extra compensation comes at the expense of additional roles and responsibilities. Hence the overall performance of the person is compromised in the course of carrying out the overburdening tasks within stringent and non-flexible deadlines. The compensation turns out to be a “golden handcuff” in this case (Atchison, 2003).

5.     Many people tend to confuse motivation with manipulation. It should be noted in this context that while manipulation has a negative connotation in certain cases, motivation is always something positive and productive for both the managers and the employees.

6.     A common misconception is that motivational skills are innate and not acquired. But this is not true. Manion opines that motivational and influential skills can be developed over time via proper understanding and implementation of the theories and principles of motivation.

7.     The managers tend to focus more on the “one size fits all” theory of motivation. This means that similar techniques of motivation can inspire all categories of employees. But this has been found to be ineffective in many cases. Atchison is of the opinion that “tailoring rewards and recognition” is one of the best means of recognizing the unique qualities of an employee since it acknowledges the employee’s achievements exactly the way he expects (Ronald,1990).

Several theories have been postulated in order to resolve the limitations of the traditional motivational techniques. The upcoming sections will discuss those theories with a special emphasis on the monetary aspects of each.

4. Herzberg’s two-factor theory

This is one of the popular motivational theories that take into account two major aspects of motivation- extrinsic and intrinsic. This theory in general puts a lot more stress on the hygiene factors involved in professional motivation and is hence known as “Motivation Hygiene Theory” (Frederick, Mausner, 1959)

                        The intrinsic factors are essentially non-materialistic motivators. These encompass – responsibility, recognition, nature of job, advancement, and achievement. Often overlooked by the managers, these factors are critical to employee satisfaction. If an employee is content with the present job scenario which takes into consideration his personal requirements in terms of acknowledgment and role assigning, he will be more performance-oriented than money-oriented. Although it may appear implausible, in the long run, this will boost his compensation and the related matters as well.

The extrinsic factors include the “hygiene factors” or more correctly the dissatisfaction factors. In a few cases, the extrinsic factors directly indicate the financial and other “materialistic” aspects. The primary extrinsic factors are- salary, job security, work environment, interpersonal relationships, and the quality of supervision experienced by the employee. Administrative policies and company policies are also considered as the secondary extrinsic factors, based on how it affects the employee.

To explain the effectiveness of this theory, Frederick Herzberg conducted a study in 1950 in the form of interview questions. The main motto of this study was to understand the interconnection between job satisfaction and work-level productivity. The participants of the study were 200 accountants and engineers in Google. This study revealed that several hygiene factors in Google such as choice of medical programs, meals in the cafeteria, stock options, and emergency leaves contributed to the growth of the employees from the feeling that the company is taking care of their personal needs (Theories of Motivation, 2007).

4.1 Herzberg’s two-factor theory in the context of pay-induced motivation

            In his theory, Herzberg considers money as a “hygiene” factor that will not directly motivate people. He emphasizes the fact that money will affect performance only when the employees are not receiving remunerations or are in some similar situation. But once the lower-order needs (Maslow’s hierarchy of needs) like social and economic needs are fulfilled, money ceases to be a motivator (Maslow,1954). In such cases, money can be turned into a motivator if the employee is rewarded some merit bonus or promotion on account of his performance in the preceding financial year.

            A very clear fact is also evident from Herzberg's theory that merely removing the dissatisfaction factors (even if it implies a higher remuneration) cannot guarantee employee motivation. In the end, a majority of the employees will prefer self-actualisation and transcendence (Maslow’s higher-order needs) over monetary satisfaction (Maslow,1954).

5. Vroom’s expectancy theory

            A popular theory of motivation that has gained momentum in recent years is “Vroom’s expectancy theory”, which is based on Victor Vroom’s work on motivation in 1964. It is also known as “Valence-Instrumentality-Expectancy Theory”. The primary assumption of this theory is the conscious and careful choice of an employee among a set of given options, which are targeted towards “maximum pleasure and minimum pain” (Ronald,1990). As per Vroom’s theory, in every step, the employee evaluates the end-to-end process and tries to predetermine the outcomes of the process. In the end, the employee opts for that task or responsibility that has the prospect of maximum reward and recognition (Worforce Motivation).

            As the name implies, there are three key postulates of this theory namely- Expectancy (E), Instrumentality (I) and Valence (V) (Venugopalan, 2007). They are discussed below -

1.     Expectancy (E): Expectancy denotes the beliefs and qualms of an employee regarding the achievability of a certain job.  On being assigned a particular job, three main questions arise in the mind of an employee. These are-

(a)  Is this job achievable?

(b)  What is the guarantee that I can perform this task successfully despite putting in the maximum possible effort?

(c)   Even if I accomplish this task successfully, what are the chances of the management authority of recognizing my efforts and rewarding me accordingly?

A number of factors determine the expectation levels of the employees with respect to a particular job. These are listed below-

·       Presence of necessary skill-sets for the task

·       Confidence level to accept the challenge

·       Assistance and cooperation from supervisors and co-workers

·       Quality of materials and equipment provided for carrying out the task

·       Availability of adequate information and resources and the ease of access

2. Instrumentality: Instrumentality is the act of connecting the primary outcome with a secondary outcome. The primary outcome is generally the performance level after completion of the task. The secondary outcome is the rewards and recognitions based on the performance (Venugopalan, 2007). If the employee senses that he is definitely eligible for rewards if his achievements are excellent, he will adopt an approach of maximum efficiency and focus which is directed towards achieving, or at times, overachieving the goal.

3. Valence: Valence refers to the emotional connection between the employees and their achievable targets. This principle makes the employee think about the rewards at the beginning of the task itself.

A positive valence implies that the employee will prefer a task only if it is associated with rewards. A negative valence means that the employee will take up the task even if there are the least possibilities of rewards and acknowledgements on successful completion. Negative valence arises mainly at the times of recessions and lay-offs when the employee focuses more on sustaining himself than on additional gains. A zero valence means that the employee is apathetic about the consequences, that is the possibility of receiving or not receiving a reward will not alter his performance in any way (Benjamin, Roger, Bruce).

4.1 Relevance of Vroom’s theory with pay-induced motivation

            Vroom’s theory gives a very clear idea of the motivational requirements of an employee. It shows that once the basic financial needs of an employee are met, he stops caring about the lower order needs. In certain cases, an employee may even reject a certain assignment if it serves him only with the basic benefits and nothing more. Exceptions can be made in such cases if every task is tied to a reward on successful completion (Theories of Motivation,2007). The employees may even exceed the expectation levels of their supervisors if they find the rewards lucrative enough. Care should be taken so that the employees do not experience zero instrumentality (tasks evaluated carelessly without considering the time and effort involved) in these cases. This may create long-term employee dissatisfaction and may demotivate the employee permanently.

5. A case study reflecting the “pay-motivation” method

This section discusses a case study conducted at TESCO, a London-based company. The participants of the study were the customer assistants, departmental managers, warehouse employees, office and logistics staff (Sarita, Ashutosh).

            The study showed how TESCO keeps its employees’ motivational level at peak by catering to their intrinsic and extrinsic demands. The company was found to meet the extrinsic demands by means of recognition and timely rewards. They also motivated the staff through certain intrinsic rewards such as job satisfaction via proper training and developmental programmes (Sarita, Ashutosh).

            The main benefits awarded to the company staffs were-

1.     Flexible working hours

2.     Health benefits at a subsidized rate

3.     Discounted gym membership

4.     Competitive salaries

5.     Staff discount

6.     Company share options

In addition to these, the pension schemes, allowance of career breaks, and lifestyle breaks were the keys to the success of the company.

            The company factsheets showed that in the year 2009, nearly 80% of the 3000 newly recruited managers were internally appointed by the company (Sarita, Ashutosh). A detailed analysis showed that Taylor’s motivational theory formed the backbone of the company policies. But considering the limitations of the ‘piece-rate’ payment principle of this theory, TESCO employed the “Mayo’s effect” at a later stage to prevent the employees’ motivational level from sagging.

6. Conclusion

In the aggregate, this paper highlights the importance of payment in employee motivation. But it also shows clearly that “money” cannot be a driving factor if the relationship between the effort and the expected reward is not clearly defined by the company policies. The study also stresses the importance of payment that is commensurate with the level of expertise and the experience of the respective employee.


1.     Pardee Ronald, 1990, “A Literature Review of Selected Theories Dealing with Job Satisfaction and Motivation”, Information Analyses Reports General (140)

2.     Fremot Kast, Rosenzweig James, 1970, “Organization and Management: A Systems and Contingency Approach”, MacGrawHill Company, New York

3.     Yorks, Lyle, 1976, “A Radical approach to job enrichment”, Amacom Publishers, New York

4.     Shanks H. Nancy, “Management and Motivation”, Chapter 2, Jones and Barltlett Publishers

5.     Morse G, 2003, “Why we misread motives”, Harvard Business Review, 81(1),18

6.     Manion J, 2005, “From management to leadership”, San Francisco, Josse Bass

7.     Atchison A., 2003, “Exposing the myths of employee satisfaction”, Healthcare Executive, 17(3), 20

8.     Herzberg Frederick, Bernard Mausner, Barbara Snyderman, 1959, “The motivation to work”, Wiley Online Publications, New York

9.     Theories of Motivation”, 2007, NES Knowledge Services, Page 5

10.  Maslow, Abraham H., 1954, “Motivation and Personality”, Harper and Bros, New York

11.  Workforce motivation”, Chapter 20

12.  Venugopalan O., 2007, “Theories of Motivation”, Department of Commerce and Management Studies, University of Calicut

13.  Ball Benjamin, “A Summary of Motivation Theories

14.  Stotz Roger, Bolger Bruce, “Content and Process Theories of Motivation”, Underlying Principle Series, The incentive Marketing Association

15.  Srivastav Sarita, Pandey Ashutosh, “Motivational Theory in Practice at TESCO”, A Tesco Case Study



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