People work for a number of reasons. Most people work because they need to earn money to survive, while others work voluntarily for other reasons. Motivation is the reason why people work, and it drives them to work better. Therefore, managers try to find out what motivate workers and use them to encourage workers to work more efficiency. This results in higher productivity, increased output, and ultimately higher profits.

  • Nowadays, machinery is more common in businesses which results in increased productivity as well. However, the amount that a well motivated workforce can produce must still be recognised, since employees are a firms greatest assets!

Motivation theories

People work very hard when they are working for themselves. When they work for other people, less so. Managers have been looking into what makes employees contribute their fullest to the company and these studies have resulted four main theories of motivation.



  • Money is the main motivator.

  • If employees are paid more, they work more.
  • Work is broken down into simple processes, and more money is paid which will increase the level of productivity an employee will achieve.
  • The extra pay is less than the increased productivity


  • Workers are seen rather like machines, and this theory does not take into account non-financial motivators.
  • Even if you pay more, there is no guarantee of a productivity rise.
  • It is difficult to measure an employee’s output.


Maslow created what is known as the hierarchy of needs.

In this diagram, there are 5 different types of motivation:

  • Physiological needs: basic requirements for survival.

  • Security needs: the need to by physically safe.

  • Social needsthe need to belong and have good relationships with co-workers.

  • Esteem needsthe need for self-respect and to be respected by others.

  • Self-actualisation needs: the need to reach your full potential and be promoted.

Businesses realise that the more levels of motivation are available to workers, the harder they will work. Maslow also suggest that each level of motivation must be achieved before going to the next level. Once one level of motivation is met, more of that will no longer motivate the employee.


  • Some levels are not present in some jobs.
  • Some rewards belong to more than one level on others.
  • Managers need to identify the levels of motivation in any job before using it to motivate employees.


To Herzberg, humans have hygiene factors, or basic animal needs of humans. We also have motivational factors/motivators that are required for the human to grow psychologically.

Hygiene factors:

  • Status.
  • Security.
  • Working conditions.
  • Company policies and administration.
  • Relationship with supervisor.
  • Relationship with subordinates.
  • Salary.

Motivational factors:

  • Achievement.
  • Recognition.
  • Personal growth/development.
  • Advancement/promotion.
  • Job satisfaction.

To Herzberg, if the hygiene factors are not satisfied, they will act as demotivators. They are not motivators, since the motivating effect quickly wears off after they have been satisfied. True motivators are are Herzberg’s motivational factors.


McGregor splits his theory into what managers believe. One type believes in theory X, while the other type believes in

theory Y. Here is the table:

Here are some differences in how an X manager will work and how a Y manager will work:

  • X managers believe that people are naturally lazy, and has to be pushed with external factors to work harder. (e.g. higher pay).
  • Y managers believe that people want to do a good days work but need a good environment to do the work. A better environment is an internal factor.
  • X managers will try to provide incentives and supervision for employees to work hard.
  • Y managers will try to provide a favourable environment so that employees can enjoy their work.

Theory’s like Taylor’s theory are X theories, while others like McGregor’s theory are Y theories. People may say that money is the main motivator, but studies have shown that many people leave jobs because other motivational factors are not available to them.

Why do people work?

Here is a summary of why people work:

  • Money: to satisfy needs and wants.

  • Security: knowing that you are physically safe and have job security.

  • Social needs: to belong to a group, making friends at work.

  • Esteem needs (self importance): feeling important, feeling the job you do is important.

  • Job satisfaction: enjoyment from the feeling of having done a good job.

Motivating factors – financial motivators

There are three ways to motivate a workforce:

  • financial motivators
  • non-financial motivators
  • ways to increase job satisfaction

Financial rewards

Pay may be the basic reason why people work, but different kinds of pay can motivate people differently. Here are the most common methods of payment:


Wages are paid every week, in cash or straight into the bank account, so that the employee does not have to wait long for his/her money. People tend to pay wages to manual workers. Since wages are paid weekly, they must be calculated every week which takes time and money. Wages clerks are paid to do this task. Workers get extra pay for the overtime that they do. There are some ways that wages could be calculated:

Time rate: Time rate is payment according to how many hours an employee has worked. It is used in businesses where it is difficult to measure the output of a worker.

  •  + Easy to calculate the wage of the employee. A time-sheet must be filled out by the Accounts department to calculate the wage.
  • – Both good and bad workers get paid the same wages. Therefore, more supervisors are needed to maintain good productivity. A clocking-in system is needed to know how many hours an employee has done.

Here is an example of a wage slip and time-sheet:

They show:

  • Basic pay + Overtime = Gross Pay

  • Gross pay – Deductions = Net Pay

Deductions include:

  • Taxes
  • Pension
  • Union fees
  • National insurance: entitles the payee to short-term unemployment benefitssickness benefits and state pension.

Piece ratePiece rates are paid depending on how many units they have produced. There is usually a base pay (minimum wage) and the piece rate is calculated as a bonus on how many units were created. Piece rates are found in businesses where it is possible to measure a workers’ productivity.

  • + Encourages workers to work faster and produce more goods.
  • – Workers will often neglect quality, and businesses will need a quality control system which is expensive.
  • – Workers who focus on quality will earn less. Tension is caused when some workers earn more than others.
  • – If machinery breaks down, employees earn less. That is why there is a guaranteed minimum pay


Salaries are paid monthly and normally straight into the bank account. They are usually for white collar workers. A salary is counted as an amount per year that is divided into 12 monthly accounts. You do not usually receive overtime. Managers only need to pay their workers once a month, and since the amount is transferred by the bank, the manager loses much less time and money calculate salary.

Salaries are usually a standard rate, but other rewards could be given to employees:

  • Commissionpercentage is paid, usually to sales staff, depending on the value of goods they have sold. Workers are encouraged to sell more. However, they could persuade customers to buy products they don’t really want, making the company look bad. Just like the piece rate, in a bad month where there are little sales, worker’s pay will fall.

  • Profit sharingEmployees receive a percentage of the profits made. However, they will get nothing if the business doesn’t make a profit. This is often used in the service sector, where it is hard to find an employee’s contribution to the company.

  • Bonuslump sum paid to employees who have done well. It is usually paid at the end of the year or before holidays. However, this could cause jealousy between workers. Giving bonuses to a team works better.

  • Performance related payEmployee pay is linked to the effectiveness of their work. It is often used in organisations where it is hard to measure productivity. It uses the system of appraisal: employees are observed and their colleagues are interviewed to determine their effectiveness. Afterwards, the immediate superior of the employee has a meeting with them to discuss their effectiveness.

  • Share ownership: Employees receive some shares from the company. They will either benefit from dividends or sell the shares when their price has risen. They will be more motivated because they feel like a part of the company.

Motivating factors – non-financial motivators

There are other factors that motivate people in a business, and they are often called perks or fringe benefits. They may be having free accommodation, free car, etc… However, when you look at it, it is just money in different forms. Here is a list of these motivators:

  • Children’s education.
  • Discounts on company products.
  • Free Healthcare.
  • Company vehicle.
  • Free accommodation.
  • Share options.
  • Expense accounts.
  • Pension.
  • Free holidays.

Job satisfaction:

Employees will become more motivated by enjoying the job they do. Job satisfaction can come in different ways. However, there are some factors that demotivate employees if they are not satisfied, and must be satisfied before the motivators can take effect. Here are some things that make workers’ jobs satisfying:

  • Pay.
  • Promotion.
  • working conditions.
  • Fringe benefits.
  • Management
  • Working hours.
  • The nature of the work itself.
  • Colleagues, etc…

Herzberg and Maslow stresses that things such as responsibility recognition is also crucial to provide job satisfaction. Letting workers contribute to the job would also help, making jobs less boring and more creative. Here are some policies to increase job satisfaction:

Job rotation:

Workers in a production line can now change jobs with each other and making their jobs not so boring. It helps train the employee in different aspects of their jobs so that they can cover for other employees if they do not show up.

Job enlargement:

Adding tasks of a similar level to a worker’s job. Job enlargement simply gives more variety to employees’ work which makes it more enjoyable.

Job enrichment:

Adding tasks of a higher level to a worker’s job. Workers may need training, but they will be taking a step closer to their

potential. Workers become more committed to their job which gives them more satisfaction.

Autonomous work groups or team working:

This is when group of workers are given total responsibility to organise themselves and perform a task. This makes the employees feel more important, as well as giving them a sense of belonging when they are part of a team. If they organise themselves differently every time, the team could get job enlargement and job enrichment too!


Studies have shown that leadership has a great impact on worker’s motivation. Good managers have leadership skills that inspire their workers to work better, as well as directing them with a common goal. Managers use many styles of leadership, and they can be summarised into 3 main styles:

Autocratic leadership:

  • The manager controls all aspects of their subordinates’ work.
  • They keep themselves separate from employees.
  • Employees are expected to obey every command and cannot contribute to decisions.
  • Communication is only top-down

Laissez-faire leadership:

  • Objectives are shown to employees, but the task is completely delegated to them.

  • Communication can be difficult since clear instructions are not given.

  • The manager has a limited role in this type of leadership.

Democratic leadership:

  • The manager discusses tasks with his employees before making decisions.
  • Communication will be two-way, both top-down and bottom-up.

Here is a diagram to summarise the leadership styles:

The style of leadership used can vary depending on situations where they are the most effective.

Formal and informal groups

formal group is an official group that is formed to do a specific task in an organisation. An informal group is a group of people which are formed independently by themselves. They are not official, but the people in the group have a common interest or cause. Both of these groups are needed in business, and let’s see why in this example. e.g. a school might create a football team (formal group) but the players need to bond together to play effectively (informal group).

Formal groups in business

Departments within a business are good examples of formal groups. From time to time different groups might be set up to cope with different problems or do different tasks. Sometimes people from different departments could come together in a group to do a team project.

Informal groups in business

There are can be many informal groups in a business that can increase the motivation of workers because they have a true sense of belonging. e.g. There is a group of factory workers who are interested in basketball, and they form an informal group, as a result, when they get back into their formal group they are likely to co-ordinate better with each other.

There are other scenarios where two departments merge to become one, making them one formal group. However, the people from these former departments still see themselves as separate from each other. These two groups of people will refuse to co-operate until they are also merged into an informal group. Therefore, informal groups should be handled carefully in business to yield the best results.

Regular meetings, free holidays, sporting events and such things could be organised to create informal groups and use them in a more positive way to avoid them getting into the way of business activity.