MATURE: Motivation & Incentives State of the Art

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Contact: Athanasios Mazarakis

The success of a company depends among other things on the motivation of the employees. Due to this, supporting and improving employees' motivation contributes to achieve company's aims. The concept of motivation describes a current status of the organism, that is, the power to locate or to avoid an objective. Within the psychology, motivation is a collective description of multitude of phenomena and sub-processes (Rheinberg, F.: Motivation (3. edition), Stuttgart, 2000). Motives are activated and conducted to motivation by the cognition of incentives. This interplay between individuals and situations, that means between motives and incentives are the so called motivation or motivational tendency (Liepmann, D.: Motivation, Führung und Erfolg in Organisationen, Frankfurt am Main, 2000).

Motivational theories are divided in the two main groups of content theory and process theory.

Content Theory

Content theory emanates from the classification of human motives, deals with matters of motives and reveal which incentives generate and maintain behavior at individuals or their environment (Nerdinger, F. W.: Motivation und Handeln in Organisationen, Stuttgart, 1995). Here, the Maslow's hierarchy of needs (Maslow, A. H.: Motivation and personality, New York, 1954) is a well-known theory within the content theory and has a broad extension within economics literature. Maslow implies that humans not only are responsive to external stimulus conditions but also aspire towards self-realization (Von Rosenstiel, L.: Grundlagen der Organisationspsychologie: Basiswissen und Anwendungshinweise (4th edition), Stuttgart, 2000). The model promises essential guidelines to how humans can be motivation and demotivated respectively. In case of incentive design it provides certain predication about the relation between material and immaterial incentives. This relation is dependent on particular dominant needs which are individually different and depending on the situation (Wälchli, A.: Strategische Anreizgestaltung: Modell eines Anreizsystems für strategisches Denken und Handeln des Managements, Bern/Stuttgart/Wien 1995). Therefore, designing incentive systems realign on the individual motivational structures in order to influence behavior and output. It is said that output depends on one's needs, but various empirical surveys couldn't confirm this hierarchy of needs (Wunderer , R.; Grundwald, W.: Führungslehre: Grundlagen der Führung, Bd. 1, Berlin/New York 1980).

Process Theory

Process theory examines the relationship between variables that affect behavior and explains how an activity is conducted (Semmer, N.; Udris, I.: Bedeutung und Wirkung von Arbeit. In: Schuler (editor), Lehrbuch Organisationspsychologie (S. 157-191), Huber, Bern, 2004). Unlike content theory, the process theory shifts closer to the real behavior and considers interconnections between valuations and results. Mainly process theory differentiates two directions, expectancy theory (Rao, P.: Personnel and Human Resource Management – Text and cases, 2000) and equity theory (Adams, J.S.: Inequity in social exchange, Adv. Exp. Soc. Psychol., 62:335-343, 1965). Numerous empirical studies confirm the performance-driven impacts of objectives.

Considering motivational aspects, the incentive theory or "Erwartungs-Wert-" theory of motivation (Heckhausen, H.: Motivation und Handeln, Heidelberg 1989) seams deemed promising. The keynote of these theories is due to that the motivation to execute an action depends from one prospective from the attainable value (incentive) and from the subjectively estimated probability (expectation) to achieve this value. The value is governed by the satisfaction of individual needs and therefore for each person different. In this context, incentive systems are used to motivate staff. But incentives are only successful, if they are compliant to the motives of the people. Doing so, the success of knowledge transfer depends on the motivation of the transmitter having the willingness to transmit her knowledge, whereas the addressee should also be motivated in having the willingness to absorb this information sent.

Intrinsic vs. extrinsic motivation

Depending on which incentives support knowledge transfer, within the motivational research, there is a distinction between extrinsic and intrinsic motivation.

  • Extrinsic motivation is based on external incentives, motivating the employee by executing its work on a certain way. Such external incentives are for instance bonuses, wages, enabling additional leisure time or the assurance of job security. Intrinsic motivation is reckoned as factors engaged in an activity without obvious external incentives, as for instance individual responsibility, identification with the company's goals or importance for other people (Deci, E. L.; Ryan, R. M.: Intrinsic motivation and self-determination in human behavior. New York: Plenum. 1985).
  • Intrinsic motivation outclasses the extrinsic motivation within the knowledge transfer, but also loses out by extrinsic incentives (Frost, B.; Holzwarth, C.: Motivation in Communities of Practice”, New Management (10), pp. 53-59., 2001).

Incentive systems are used to motivate staff and only affect, if they are geared to the motives of the people. Incentives can be material or immaterial. Immaterial incentives are social (like appreciation) or organizational (as training or career incentives as expert status) incentives, whereas material incentives are done by money consideration.

Incentive compatible mechanism is also an issue in economic literature. Game theory and mechanism design theory pick up the issue of moral hazard and adverse selection (cp. Patrick Bolton and Mathias Dewatripont, 2005: Contract theory).

Incentive Systems

Incentive systems consist of a set of incentives and a set of reference objects, i.e. criteria as basis for assessment. Theses sets are related by criterion-incentive-relations describing the structure of the system. It is important that incentive systems pursue a specific objective (Kossbiel 1994).

Incentive systems are efficient if the following four issues are given:

  1. goals, set at the beginning, have to be achieved (from the ex post as well as from the ex ante perspective)
  2. there musst be more advantages than disadvantages
  3. another incentive system must not exist that provides the same incentives with less effort or higher level of efficiency.
  4. the benefit has to be pareto-optimal

In order to fulfill the efficiency criterion, there are the following assumptions:

  1. concerning incentive systems, the individual has to have the possibility to have significant influence and reliable detectability on the criteria. Otherwise the individual cannot change the situation by his/her actions and respectively is at the mercy of the situation.
  2. concerning the incentive itself, that's the imagination and availability; i.e. the incentive has to be anticipatory as well as achievable by the individual.
  3. concerning the criteria-incentive-relation, this has to have a perspective of size, time, and probability.

Barriers of Knowledge Sharing

Shawn [1] summarizes the work of Riege 2005 & Szulanski 1996 on knowledge-sharing barriers:

Individual knowledge sharing barriers:

  • general lack of time to share knowledge, and time to identify colleagues in need of specific knowledge;
  • apprehension of fear that sharing may reduce or jeopardise people's job security;
  • low awareness and realisation of the value and benefit of possessed knowledge to others;
  • dominance in sharing explicit over tacit knowledge such as know-how and experience that requires hands-on learning, observation, dialogue and interactive problem solving;
  • use of strong hierarchy, position-based status, and formal power ("pull rank");
  • insufficient capture, evaluation, feedback, communication, and tolerance of past mistakes that would enhance individual and organisational learning effects;
  • differences in experience levels;
  • lack of contact time and interaction between knowledge sources and recipients;
  • poor verbal/written communication and interpersonal skills;
  • age differences;
  • gender differences;
  • lack of social network;
  • differences in education levels;
  • taking ownership of intellectual property due to fear of not receiving just recognition and accreditation from managers and colleagues;
  • lack of trust in people because they misuse knowledge or take unjust credit for it;
  • lack of trust in the accuracy and credibility of knowledge due to the source; and
  • differences in national culture or ethnic background; and values and beliefs associated with it (language is part of this).

Organisational knowledge sharing barriers:

  • integration of KM strategy and sharing initiatives into the company's goals and strategic approach is missing or unclear;
  • lack of leadership and managerial direction in terms of clearly communicating the benefits and values of knowledge sharing practices;
  • shortage of formal and informal spaces to share, reflect and generate (new) knowledge;
  • lack of transparent rewards and recognition systems that would motivate people to share more of their knowledge;
  • existing corporate culture does not provide sufficient support for sharing practices;
  • deficiency of company resources that would provide adequate sharing opportunities;
  • external competitiveness within business units or functional areas and between subsidiaries can be high (e.g. not invented here syndrome);
  • communication and knowledge flows are restricted into certain directions (e.g. top-down);
  • physical work environment and layout of work areas restrict effect sharing practices;
  • internal competitiveness within business units, functional areas, and subsidiaries can be high;
  • hierarchical organisation structure inhibits or slows down most sharing practices; and
  • size of business units often is not small enough and unmanageable to enhance contact and facilitate ease of sharing.

Technological knowledge sharing barriers:

  • lack of integration of IT systems and processes impedes on the way people do things;
  • lack of technical support (internal and external) and immediate maintenance of integrated IT systems obstructs work routines and communication flows;
  • unrealistic expectations of employees as to what technology can do and cannot do;
  • lack of compatibility between diverse IT systems and processes;
  • mismatch between individuals' need requirements and integrated IT systems and processes restrict sharing practices;
  • reluctance to use IT systems due to lack of familiarity and experience with them;
  • lack of training regarding employee familiarisation of new IT systems and processes; and
  • lack of communication and demonstration of all advantages of any new system over existing ones.