2.

4 Motivation and demotivation

IB Business Management
• What makes you want to get out of bed and come to
school everyday?

• What motivates you to study and complete your

Business Management subject?
“If managers can motivate employees
it is more likely that those managers
will achieve their goals.”
• Define the term labour turnover.
• Movement of employees into and out of a business in a given time
period (usually a year).
• State the formula to calculate labour turnover.

Labour turnover = Number of staff leaving over a year x 100

Average number of staff employed in a year

• Outline one advantage and one disadvantage of a high labour

turnover.
• Outline one advantage and one disadvantage of a low labour
turnover.

Knowledge check
A service company has an average of 210 employees per year. During
one year, 84 employees quit.
• Calculate the labour turnover during that year.
• Comment on the result.

Workpoint
• Define the term motivation.
• Desire or willingness to do something or achieve a certain result.
• State indicators of poor labour motivation.
• Lateness
• Absenteeism
• Labour turnover
• Poor performance
• Poor response rate
• Grievances
• Accidents

Knowledge check
• Explain the importance of having a motivated workforce.
• Helps an organization boost its profitability.
• Increased effort results in higher productivity.
(Increase revenue)
• Pride in the work leads to improved quality.
(Increase revenue)
• Loyalty to the business reduces labour
turnover. (Reduce costs)
• Commitment to the business reduces
absenteeism. (Reduce costs)

Knowledge check
• Distinguish between intrinsic and extrinsic motivation.
• Intrinsic motivation occurs when someone gets satisfaction from an
activity itself.
• Extrinsic motivation refers to the motivation that comes from outside
the activity.

Knowledge check
• State the six motivational theories. Describe one.
• Scientific management, by Frederick Taylor
• Hierarchy of needs, by Abraham Maslow
• Two-factor theory, by Fredrick Herzberg
• Acquired needs theory, by David McClelland
• Self-determination theory, by Edward Deci and Richard Ryan
• Equity theory, by John Adams

Knowledge check
• When there is a question about
theories of motivation, try to do
more than just list their main
findings – apply their ideas to
the business situation given.

Exam tip
 What people need What businesses can offer

Training, challenges and

Achieving full potential, self-
Self- opportunities to develop new
fulfillment
actualization skills
Gaining the respect of others;
feeling valued; having Reward for achievement;
Esteem needs promotion and status
confidence and self respect
Being part of a group; giving Teamwork; social facilities
and receiving affection and Love and belonging needs and positive working
friendship relationships
Security; absence of Health and safety; job
danger; freedom from Safety needs security; absence of
fear and anxiety bullying

Decent pay;
Food, drink, acceptable working
clothing, shelter, Physiological needs hours and
rest, activity conditions

Maslow’s hierarchy of needs

• Define the term recruitment.
• Process of identifying the need of a new employee, attracting suitable
candidates, and selecting the best one.
• State the three stages of the recruitment process. Describe one.
• Identification, application, and selection.
• State the information detailed in a job description.
• The job title, the employee’s functions, and the employee’s
responsibilities.
• State the information detailed in a person specification.
• The skills required, the necessary qualifications, and the necessary
experience.

Knowledge check
• State the aspects to be considered for a job advert.
• Where to place the advert?
• What to include in the advert?
• What legal requirements have to be met?
• Contrast the application form and the résumé.
• The application form is designed by the organization and it is
standardized. The résumé is done by the applicant and it is more
flexible.
• The application form is useful for job positions with lots of possible
applicants. The résumé is usually requested for job positions with few
possible applicants.
• The application form takes time to be filled in. The résumé is quicker to
be submitted as it is prepared beforehand.

Knowledge check
• Distinguish between internal and external recruitment.
• Internal recruitment is when the organization recruits someone who is
already working there to take on the new position.
• External recruitment is when the organization recruits someone who
does not belong to the organization, the individual is external to the
organization.
• Outline the advantages and disadvantages of internal recruitment.
• Advantages: Cheaper, quicker, more efficient.
• Disadvantages: Limits the pool of potential candidates, may cause
internal resentment, leaves a vacancy to be filled in.

Knowledge check
• Outline the advantages and disadvantages of external recruitment.
• Advantages: New ideas, wider range of potential applicants, higher
standard of applicants.
• Disadvantages: Time-consuming, costly, inefficient.
• State the most common methods of external recruitment.
• Recruitment agencies
• Job centres
• Specialist publications
• Personal contacts

Knowledge check
• State the criteria used for shortlisting.
• The employees’ overall quality, number of employees required for
interview, legal requirements.
• State the different types of testing.
• Aptitude, psychometric, team-based.
• State the different types of interviews.
• Face to face
• Panel
• Video conference
• Multi-stage
• Multi-day

Knowledge check
IB learner profile - Thinkers
A new restaurant is opening in your city. It will sell expensive dishes
cooked by a highly-trained and well-known chef.
The restaurant requires waiters and waitresses.
• Prepare a job description and a person
specification for this job position.
• Prepare a job description and a person
specification for one job position in a
fast-food restaurant.

Workpoint
• Define the term training.
• Work-related education to increase workforce skills and efficiency.
• State the benefits of training for an organization.
• Improves the quality of the work
• Leads to greater productivity
• Motivates the employee
• Reduces labour turnover
• Helps the employee adopt innovation
• Prepares the junior staff to cover the senior staff

Knowledge check
• Outline three types of training.
• Induction (orientation)
• On-the-job
• Off-the-job

Knowledge check
• Define the term appraisal.
• Process of assessing the performance, effectiveness, and value of
employees in an organization.
• Distinguish between appraisal and inspection.
Appraisal Inspection
Employees’ may respond to or even Managers review employees’
initiate discussion. performance and make judgements based
on their observations.
Communication is two-way. Communication tends to be one-way and
top-down.
Managers include constructive feedback. The process focuses on the negative
It is a non-threatening, non-judgemental, indicators of performance.
supportive process.

Knowledge check
• State the benefits of appraisal for the employee and the business.
• For the employee:
• Motivating
• Instructive
• Helps progress along the career path
• Leads to a change in career direction
• For the business
• Check on performance
• Useful to record and document performance
• Recognizes good performance
• Review new initiatives

Knowledge check
• State two characteristics of a good appraisal system.
• Not directly linked to pay and promotion.
• Separate from disciplinary systems
• Requires minimal paperwork
• Provides an honest exchange of views
• Outline four methods of appraisal.
• Formative
• Summative
• 360 degree
• Self-appraisal

Knowledge check
MOTIVATION IN PRACTICE
• Define the term package of rewards and outline its importance.
• Set of financial and non-financial rewards given to an employee as a
retribution for its work. It is established according to the job position.
• It is important because:
• It helps satisfy and motivate
the workforce.
• It can attract talented
employees.

Knowledge check
 Package of rewards

Financial rewards Non-financial rewards

Payment systems Incentive schemes Job rotation

Piece-rate bonus
Piece-rate wage Job enlargement
Bonuses Commission

Time-rate wage One-off payment Job enrichment

Profit-related pay
Salary Empowerment
Performance-related pay
Fringe benefits Team working
Profit sharing
Purpose / Opportunity to
Share ownership make a difference
• Do not confuse salary with wages as types of financial rewards.
• Wages are a variable cost of production (payment is higher if
employees produce more or work overtime), whilst salaries are
fixed costs for the business.
• The two terms should not be
used interchangeably.
• Remember that salaries are
typically paid to white-collar
workers, and wages are paid
to blue-collar workers.

Exam tip
• A real-estate agent earns a monthly salary of $2500 plus 0.25%
commission per transaction made.
• Calculate her total pay if she manages to sell $3.4 million worth of
real estate in a month (show all your working).

Workpoint
• Whilst profit-related pay and performance-related pay (PRP) sound
very similar, the firm’s profit is very unlikely to be attributable to an
individual employee.
• Hence, profit-related pay tends to be used for rewarding teams,
PRP is often used to reward individuals.

Exam tip
• It is accepted that money is not the only motivating factor for
people to work effectively and to be satisfied in their jobs.
Managers need to take a critical look at all of the financial and non-
financial methods of motivating staff.
• What works for some groups of
workers will not be effective with
others.
• Managers need to be flexible and
adapt the methods and approaches
that are available to motivate staff
to the particular circumstances of
their business and their workforce.

Evaluation of financial and non-financial

motivational methods
• The main factors that influence the different degrees of emphasis
on pay and non-pay factors include the leadership style of
management and the culture of the organization.
• If managers have the idea that workers are naturally lazy and
cannot be trusted, then a ‘piece rate or payment by results’ system
with close supervision will be adopted.
• If the culture views workers as partners or associates in the
business, then production will be organized to give workers a
chance to accept responsibility and to participate. A monthly salary
payment system is likely under these circumstances.
• As with so many important decisions made within a business, a
great deal depends on the attitudes and beliefs of senior managers
and the business culture they adopt.

Evaluation of financial and non-financial

motivational methods
• Multinational companies need to adapt their reward systems to
those which are most likely to be effective within the different
cultures that the business operates in.
• Incentive schemes need to consider local differences in culture.
Clocks or watches given as incentive rewards are not acceptable in
the Asian culture. A watch or a clock means the boss is watching
the time and an employee is not putting in the effort.

Evaluation of financial and non-financial

motivational methods
• There are important cultural differences when non-financial
rewards are considered.
• Recognition of an employee’s contribution is considered to be an
important motivator but different cultures may prefer to be
recognized in different ways. In individualistic cultures such as the
USA and Australia, employee-of-the-month schemes are widely
adopted.
• However, this approach could be counterproductive in Asia where
employees prefer to be recognized for their hard work as part of a
team. Being singled out could be embarrassing and damage the
dynamics of the group.

Evaluation of financial and non-financial

motivational methods
• You should be able not just to describe and explain different
methods of financial and non-financial motivation but to suggest
which ones might be most suitable in different business situations
and different cultures.

Exam tip