Comparing Management Theories of Motivation

Principles of Management

Academic Year 2014/15

Group Report

Students: Felix Bernard, Lea Humbert, Nayir Hamiche, Omar Eid and Valentine Bernard

Essay Question:

“Compare and contrast TWO different management theories. Explain how they are used by

Organizations and the pros and cons of each. Which do you think is the most effective?”

Subsequent to the late 20th century, the 21st century set a new milestone for theories and ideas of management motivation. Diverging from traditional theories of motivation (Incentives, power, etc.), different schools of thought have remarkably influenced the present and upcoming Millennial Business World, and their approach to motivating a Business Milieu. Thus, in order to answer the research question, this comparative analysis will focus on the theory of incentives, and the theory of equity. Basically, the theory of incentives can be classified as an allocation of rewards, in which a possibility of intrinsic or extrinsic rewards can be earned (Peterson, 2004). Furthermore, the theory of equity is based upon the phenomenon of social comparison, and the motivation of employees through the implication of an equitable feeling in which all employees are allowed the same benefits, and have the same “access to success” as all other members of the firm (Schermerhorn, 1991). Thus, in order to answer the research question, this comparative analysis will compare and contrast the two theories in terms of their flexibility, characteristics, application and popularity. Furthermore, pros and cons will be discussed, and a conclusion will be given answering the question left to answer: which is the most effective theory of motivation?

A major similarity is that the two theories – incentives and equity – are not only applicable in the context of business, but also in a general “innate” context of human motivation, as “motivation stems from desire, and that desire lies in the realm of the unconscious” (Jackson, 2000). Whether this desire is for equity, or for incentives, it can be witnessed in both a business and a non-business context. Henceforth, this similarity would mainly apply intrinsic motivators (Pink, 2009) in relation to equity, as motivation here could be seen as not for the seeking of material, but for the search of identity, and a positive valuation from the other (Carter, 2000). Thus, a similarity between the two can be seen, as, hypothetically, they could apply to cavemen in the same way they could apply to businessmen, while achieving the same outcome of motivation. They are flexible.

When focusing on characteristics, a similarity is present between intrinsic motivation and the general theory of Equity. Intrinsically, the motivation of an employee arises from “within” (internal reward), as opposed to motivation proceeding as a consequence of external rewards (money, promotions, etc.) (Pink, 2009).  “The main drive of the Equity theory is that people are motivated to secure what they perceive to be a fair return for their efforts” (McKenna, 2000). Intrinsic motivators are similar to the Equity theory, as rewards that are seen as intrinsic are often indirectly related to Equity. This is because rewards relating to ‘team-belonging’, and a sense of purpose within the firm, indicate that the employee will be treated equally to the rest of the employees (Robbins, 200). Thus, the two theories are similar, such that direct relations can be seen between the characteristics of the intrinsic incentives, and the general characteristics of the theory of Equity.

A notable difference between the two theories is their popularity and perception. The word “Incentives” is often used in the world of business – particularly in capitalistic environments - for employee motivation. Equity, on the other hand, is not regularly classified as a theory of motivation, but rather a general criterion of a working environment, and a way of increasing employee retention. Basically, in a world where millennial businessmen have yet to flourish, equity is not yet popular as a theory of motivation, as it is perceived as a criterion. What could be a reason for this? In a Ted Talk, Dan Pink was quoted saying, “There is a misconception between what science knows, and what business does” (Pink, 2009). Incentives are often referred to as the most effective way to motivate employees, however, studies such as Dunker’s “Candle Experiment” have shown that traditional incentives restrict the outcomes of creative business tasks. Thus, a major difference between the two is in their popularity, as a consequence of their perception. On one hand, traditional managers think that offering incentives for business tasks increases productivity, and on the other hand, studies of social behaviorists show that if managers would apply an environment of mainly intrinsic incentive, along with Equity, an employee becomes more effective. Until managers begin to incorporate these findings of science into their role of leadership, incentives will remain more popular as a theory of motivation, and the theory of equity will remain a criterion of business environments, rather than an implemented theory of motivation (Ramm, 2013).

Another noteworthy difference between the two theories lies in the way in which managers apply them. When traditional managers apply the theory of incentives for motivation, their main aim is to create a competitive environment between employees through possibilities of rewards, thereby increasing effectiveness (Mullins, 2005). The way in which incentives are applied is usually through job design (Jackson, 2006). Meanwhile, in the Equity theory, managers aim to create an environment of Equity by eliminating the phenomenon of social comparison and inequality (McKenna, 2000). In this case, the aim of managers is to make everything in the firm equal for the employee in terms of input-output ratios, schedule flexibility, etc. An important point here is that if the incentive theory had a track record of being applied purely intrinsically, the difference in their application by managers would not exist. However, since extrinsic rewards have played a far more dominant role in the world of management theories, the difference between the two is significant. Thus, a noteworthy difference between the two theories is in the way that managers apply them to the firm.

A major advantage of the incentive theory is that when it is applied correctly in relation to a task, it can significantly increase productivity. Moreover, studies suggest that when incentives are applied correctly, they can lead to a clear increase in productivity by up to 20%, if not more (Lawler, 1971). Furthermore, the application of an extrinsic incentive theory leads to a more competitive business environment, which in some cases is the ideal environment to have in a certain type of company (e.g an investment bank). On the other hand, modern day managers have begun to promote intrinsic methods of motivation. An example of this is Google’s “20% time”, in which all employees of Google have a day off per week to work on side projects, which are related to the organization. This led to the founding of utilities such as Gmail and Google docs. “20% time” is a prime example of intrinsic rewards working to the benefit of the firm (Forbes, 2013). Thus, an advantage of the incentive theory is that when it is applied accordingly in relation to the task that needs to be performed, it leads to a significant increase in output.