Impacts of Motivation in Employee Performance Essay Example for Free

Impacts of Motivation in Employee Performance Essay 1. INTRODUCTION 1.1 Back Ground of the Study The study was attempted to investigate analytically the major causes of employees’ motivation in Commercial Bank of Ethiopia. To accomplish this, the research was considered to take appropriate data that relevant to the problem. Since, Commercial Bank of Ethiopia is the major sector that supports the current development of Ethiopia economy and the five years of transformation plan, so it should be better to take study to identify the major causes that affects of employees’ motivation toward their work and to propose necessary tools of solution to mitigate the problem. This will be at least a solution currently and in the future for the organization. The major initiatives to conduct this study are also one of the researchers is working in Commercial Bank of Ethiopia that observe most of employees are not satisfied or motivated to work. This forced the rest researchers to examine the basic problems of human resource management unable to conduct how frequently motivate employees’ in the existing work place using financial and non financial tools. If this problems not solved, it may affects the image of the organization, belongingness workers etc†¦gradually. Considering this, it should be necessary to conduct study to identify the major causes of employees’ dissatisfaction in their work place that affects motivation, and the drawback of motivation packages relative to the image of the organization and its strategic plan which is to be â€Å"Classic Bank In The World†. To do an extensive study, the researcher performed methodological ways of gathering data pursuant to the problems and objective of the study paper. The employees are one of the vital resources or ingredient that will help organization to achieve its objectives. Employees supply their talents, knowledge, skill and experience towards to the achievement of organizational objectives. To get maximum performance from employees, the organization must have the necessary motivational scheme that encourages employees for better performance. Optimizing performance of employees by motivational factors is challenging and sensitive due to uniqueness of working force which came to organization from different socio-economical background. Performances of motivated employees create high productivity, innovativeness and good attitudes towards the organizations. There is a relationship between motivational factors and some facts of the employees behavior such as performance, turnover, absenteeism, poor attendance, willingness to do more, creativity, flexibility, and commitment to the organization. So motivation has important implications because it affects the individual quality of work, life, and performance. Therefore, managers are expected to have necessary skill on how to motivate employees. Commercial Bank of Ethiopia as a service rendering organization thereby maximizing its profit, its quality of service is highly determined by devotion of its employees. Therefore, the bank has to give importance to the recruitment of educated employees, to staff training and the improvement of workers’ benefit packages. Besides, it has to revise its benefit package with a view to motivating its staff towards greater efficiency and competence. In general, the study was focused on to investigate the real causes of employees’ dissatisfaction at their work place in the Bank and its impacts toward the image, rest of employees’ belongingness. 1.2 Back Ground of the Organization Currently, the Commercial Bank Ethiopia (CBE) has 15 district offices and above 300 branches throughout the country serving as market outlets. As the largest bank and development partner of the Ethiopian Government, the CBE has transferred Birr 1.23 Billion in 2008 1 to the coffers/treasure of the state. In 2005/2006, the market share of the Bank was 24% and 76% for credit extension and deposit mobilization, in that order. The Commercial Bank of Ethiopia (CBE) is the leading Bank in the country. It has over 8,600 employees and close to 2 million accounts holders throughout the country, and total asset of Birr 73.7billion, total deposit and other liabilities of Birr 56.1 billion and outstanding loans of Birr 22.9 billion, and close to 70 years of solid accumulated banking experience. The CBE is in the forefront of the banking industry in meeting the financial needs of the various sectors, sub-sectors and ongoing varied investment projects in the economy. It has diversified credit portfolio with loan facilities extended ranging from farmers’ cooperatives to commercial farmers and large manufacturing and construction project. Commercial Bank of Ethiopia currently has given services for customers such as Deposit, Loan service, foreign currency service etc†¦ The CBE has a vision to be world a worldwide class commercial bank by 2025.It has also set a strategy of exceeding customers and stake holder’s expectation through service excellence and business growth supporting the development efforts in the country. Commercial Bank of Ethiopia currently played a great role for the development of the economy to achieve the million goal of the country. (CBE Public Relations Documentation, 2011). 1.3 Statement of the Problem It is obvious that currently Commercial Bank of Ethiopia is a major blood for the current economic growth of Ethiopia. In order to fulfill this, the company mobilized big amount of foreign and domestic currency to facilitate and support high investment process in the economy. To perform effectively this, the firm should have well developed human resource management tools to enhance the work forces motivation toward their work which help to create loyal and belonging employees in the work area. This has a direct relationship with the service quality level to satisfy the existing and prospect customers. Moreover to introduce new and modern type of working system throughout the organization, there should be also a sound strategy of workers motivation program, which helps to increase workers retention in the bank. Organizations that only focus on its goal, without considering the factors of employees motivation toward their works has become a cause of fragility of the business in the long run. In this essence, employees that are not satisfied in their organization could not be initiated to exert more efforts effectively in the organization, instead they will look for other opportunities externally and vote with their feet by moving their allegiance to competitors, and this will affect the firms in the long run. The outcomes of the research will help the organization to take the necessary corrective measurements in the future and to revise its motivation strategy of employees. Because of the above major problems, the existing employees’ lack confidence on the bank. Moreover, the bank faces problem of employees’ turnover due to lack of effective motivation, this also results in high cost of getting experienced employees and recruiting of new one. Therefore; regarding the above problem, the study attempted to respond the following basic research questions. 1.What is the feeling and attitudes of employees towards to motivational factors used in Commercial Bank of Ethiopia? 2.What are the consequences of job dis-satisfaction in Commercial Bank of Ethiopia? 3.What are the consequences of lack of motivated employees’ performance? 4.What is the effect of motivation on employees’ loyalty to the organization? 5.What kind of action should be taken by the bank to increase employees’ motivation toward work areas? 6.What are the basic factors for employees’ motivation in the work area? Is it financial or non financial benefits? 1.4 Objective of the study Due to lack of effective motivation, most employees are dissatisfied to their work place; this creates desperate work forces that perform their work till to get other opportunities of work in order to get the root of the problem the study set the following objectives. General objective The general objective of the study was to identify the causes and impacts of lack of employees’ motivation and to identify the basic causes of dissatisfaction of employees to ward their work, which aggravated lack of employees’ motivation. Specific Objective †¢To indicate which is the basic factors for lack of employees motivation currently in the bank †¢To show the relation between lack of employees’ motivation impacts and employees’ turnover. †¢To assess the potential consequences of lack of employees’ motivation in the Bank. †¢ To set appropriate recommendation for the problem based on the findings. 1.5 Significance of the study The study identified the major causes of employees’ dissatisfaction, which is a major factor that affects motivation of employees at the work area. The outcomes of the research help to increase employees’ satisfaction at their works that support to increase the service level of customers’ satisfaction. Moreover, increase of work force motivation has also a direct relationship to minimize turnover in the bank. The other advantages of increase of motivation of employees at the work area are enables employees to enhance their loyalty for the organization and at the same time employees’ belongingness increase. This also helps for the reputation of the image of the bank. Employees will increase their efficiency to serve their customers with smiling face. Moreover also; the study provided a hint for other researchers as a reference, and the findings of the study will help to give valuable information for top management to establish new system to increase employe es’ motivation. 1.6 Scope of the study The study considered major causes of employees’ lack of motivation in the Bank especially focusing in the area of Addis Ababa core operation. It scopes limited to study employees’ lack of motivation in Addis Ababa area only, by taking as a population and sample of the existing employees. 1.7 Limitation of the Study The major limitation of the study is constraints of time and collecting appropriate data from respondents since there was few samples unwillingness to return the questionnaires properly. 1.8 Research Methodology 1.8.1 Research Design The study applied the following types of research method to investigate the problems. The research is designed by using both Primary Secondary data. 1.8.2 Source of Data Methods of Data Collection The method of data collection carried out by distribution of questioners, which consist of both closed and open-end questioners. The questioners were being the main instrument of primary data collection. The secondary data gathered from different books, literature review, internet and printed materials. 1.8.3Sampling Design Techniques A sampling technique of random sampling adopted by taking the sample from the selected four city branches and two departments of Manager and non-manager line staff employees of commercial bank of Ethiopia. The total population was taken 200. 1.8.4Methods of Data Analysis Descriptive and explanatory methods of data analysis applied. Test hypothesis for possible interdependence and effect relation ships conducted for easy understanding of trends of some patterns of distribution, table, percentage and interpretation of data conducted based on the response and theoretical concepts. 1.9 Organization of the paper The study paper included four chapters. The first chapter is about the introduction part which contains back ground, statement of problems, objective of the study, significance, methodology of research, limitation of the study and organization of the paper. In Chapter II, Theoretical concepts from internet are included. Chapter III included the important part of the study, which is data analysis and interpretation, this lead to the final Chapter IV, which described the summary of findings, conclusions and recommendation of the paper. CHAPTER TWO 2. LITERATURE REVIEW OF MOTIVATION 2.1 Motivation and Motivation Theory The term motivation is derived from the Latin word movere, meaning to move. Motivation can be broadly defined as the forces acting on or within a person that cause the arousal, direction, and persistence of goal-directed, voluntary effort. Motivation theory is thus concerned with the processes that explain why and how human behavior is activated. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). The broad rubric of motivation and motivation theory is one of the most frequently studied and written-about topics in the organizational sciences, and is considered one of the most important areas of study in the field of organizational behavior. Despite the magnitude of the effort that has been devoted to the study of motivation, there is no single theory of motivation that is universally accepted. The lack of a unified theory of motivation reflects both the complexity of the construct and the diverse backgrounds and aims of those who study it. To delineate these crucial points, it is illuminating to consider the development of motivation and motivation theory as the objects of scientific inquiry. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.2 Historical Development Early explanations of motivation focused on instincts. Psychologists writing in the late 19th and early twentieth century have suggested that human beings were basically programmed to behave in certain ways, depending upon the behavioral cues to which they were exposed. Sigmund Freud, for example, argued that the most powerful determinants of individual behavior were those of which the individual was not consciously aware. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). According to Motivation and Leadership at Work (Steers, Porter, and Bigley, 1996), in the early twentieth century researchers began to examine other possible explanations for differences in individual motivation. Some researchers focused on internal drives as an explanation for motivated behavior. Others studied the effect of learning and how individuals base current behavior on the consequences of past behavior. Still others examined the influence of individuals cognitive processes, such as the beliefs they have about future events. Over time, these major theoretical streams of research in motivation were classified into two major schools: the content theories of motivation and the process theories of motivation. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.3 Major Content Theories Content (or need) theories of motivation focus on factors internal to the individual that energize and direct behavior. In general, such theories regard motivation as the product of internal drives that compel an individual to act or move (hence, motivate) toward the satisfaction of individual needs. The content theories of motivation are based in large part on early theories of motivation that traced the paths of action backward to their perceived origin in internal drives. Major content theories of motivation are Maslows hierarchy of needs, Alderfers ERG theory, Herzbergs motivator-hygiene theory, and McClellands learned needs or three-needs theory. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.3.1 Maslows Hierarchy of Needs. Abraham Maslow developed the hierarchy of needs, which suggests that individual needs exist in a hierarchy consisting of physiological needs, security needs, belongingness needs, esteem needs, and self-actualization needs. Physiological needs are the most basic needs for food, water, and other factors necessary for survival. Security needs include needs for safety in ones physical environment, stability, and freedom from emotional distress. Belongingness needs relate to desires for friendship, love, and acceptance within a given community of individuals. Esteem needs are those associated with obtaining the respect of ones self and others. Finally, self-actualization needs are those corresponding to the achievement ones own potential, the exercising and testing of ones creative capacities, and, in general, to becoming the best person one can possibly be. Unsatisfied needs motivate behavior; thus, lower-level needs such as the physiological and security needs must be met before upper-level needs such as belongingness, esteem, and self-actualization can be motivational. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). Applications of the hierarchy of needs to management and the workplace are obvious. According to the implications of the hierarchy, individuals must have their lower level needs met by, for example, safe working conditions, adequate pay to take care of ones self and ones family, and job security before they will be motivated by increased job responsibilities, status, and challenging work assignments. Despite the ease of application of this theory to a work setting, this theory has received little research support and therefore is not very useful in practice. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.3.2 Alderfer’s Erg Theory. The ERG theory is an extension of Maslows hierarchy of needs. Alderfer suggested that needs could be classified into three categories, rather than five. These three types of needs are existence, relatedness, and growth. Existence needs are similar to Maslows physiological and safety need categories. Relatedness needs involve interpersonal relationships and are comparable to aspects of Maslows belongingness and esteem needs. Growth needs are those related to the attainment of ones potential and are associated with Maslows esteem and self-actualization needs. 1.The ERG theory differs from the hierarchy of needs in that it does not suggest that lower-level needs must be completely satisfied before upper-level needs become motivational. ERG theory also suggests that if an individual is continually unable to meet upper-level needs that the person will regress and lower-level needs become the major determinants of their motivation. ERG theorys implications for managers are similar to those for the needs hierarchy: managers should focus on meeting employees existence, relatedness, and growth needs, though without necessarily applying the proviso that, say, job-safety concerns necessarily take precedence over challenging and fulfilling job requirements. (http://wwww.csb.gov.hk/hkgcb/hrm/pdf). 2.3.3 Motivator-Hygiene Theory. Frederick Herzberg developed the motivator-hygiene theory. This theory is closely related to Maslows hierarchy of needs but relates more specifically to how individuals are motivated in the workplace. Based on his research, Herzberg argued that meeting the lower-level needs (hygiene factors) of individuals would not motivate them to exert effort, but would only prevent them from being dissatisfied. Only if higher-level needs (motivators) were met would individuals be motivated. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). The implication for managers of the motivator-hygiene theory is that meeting employees lower-level needs by improving pay, benefits, safety, and other job-contextual factors will prevent employees from becoming actively dissatisfied but will not motivate them to exert additional effort toward better performance. To motivate workers, according to the theory, managers must focus on changing the intrinsic nature and content of jobs themselves by enriching them to increase employees autonomy and their opportunities to take on additional responsibility, gain recognition, and develop their skills and careers. 2.3.4 Mcclellands Learned Needs Theory. McClellands theory suggests that individuals learn needs from their culture. Three of the primary needs in this theory are the need for affiliation (n Aff), the need for power (n Pow), and the need for achievement (n Ach). The need for affiliation is a desire to establish social relationships with others. The need for power reflects a desire to control ones environment and influence others. The need for achievement is a desire to take responsibility, set challenging goals, and obtain performance feedback. The main point of the learned needs theory is that when one of these needs is strong in a person, it has the potential to motivate behavior that leads to its satisfaction. Thus, managers should attempt to develop an understanding of whether and to what degree their employees have one or more of these needs, and the extent to which their jobs can be structured to satisfy them. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.4 Major Process Theories Process (or cognitive) theories of motivation focus on conscious human decision processes as an explanation of motivation. The process theories are concerned with determining how individual behavior is energized, directed, and maintained in the specifically willed and self-directed human cognitive processes. Process theories of motivation are based on early cognitive theories, which posit that behavior is the result of conscious decision-making processes. The major process theories of motivation are expectancy theory, equity theory, goal-setting theory, and reinforcement theory. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.4.1 Expectancy Theory. In the early 1960s, Victor Vroom applied concepts of behavioral research conducted in the 1930s by Kurt Lewin and Edward Tolman directly to work motivation. Basically, Vroom suggested that individuals choose work behaviors that they believe lead to outcomes they value. In deciding how much effort to put into a work behavior, individuals are likely to consider: †¢Their expectancy, meaning the degree to which they believe that putting forth effort will lead to a given level of performance. †¢Their instrumentality or the degree to which they believe that a given level of performance will result in certain outcomes or rewards. †¢Their valence, which is the extent to which the expected outcomes are attractive or unattractive. All three of these factors are expected to influence motivation in a multiplicative fashion, so that for an individual to be highly motivated, all three of the components of the expectancy model must be high. And, if even one of these is zero (e.g., instrumentality and valence are high, but expectancy is completely absent), the person will have not motivation for the task. Thus, managers should attempt, to the extent possible, to ensure that their employees believe that increased effort will improve performance and that performance will lead to valued rewards. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). In the late 1960s, Porter and Lawler published an extension of the Vroom expectancy model, which is known as the Porter-Lawler expectancy model or simply the Porter-Lawler model. Although the basic premise of the Porter-Lawler model is the same as for Vrooms model, the Porter-Lawler model is more complex in a number of ways. It suggests that increased effort does not automatically lead to improved performance because individuals may not possess the necessary abilities needed to achieve high levels of performance, or because they may have an inadequate or vague perception of how to perform necessary tasks. Without an understanding of how to direct effort effectively, individuals may exert considerable effort without a corresponding increase in performance. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.4.2 Equity Theory. Equity theory suggests that individuals engage in social comparison by comparing their efforts and rewards with those of relevant others. The perception of individuals about the fairness of their rewards relative to others influences their level of motivation. Equity exists when individuals perceive that the ratio of efforts to rewards is the same for them as it is for others to whom they compare themselves. Inequity exists when individuals perceive that the ratio of efforts to rewards is different (usually negatively so) for them than it is for others to whom they compare themselves. There are two types of inequity—under-reward and over-reward. Under-reward occurs when a person believes that she is either puts in more efforts than another, yet receives the same reward, or puts in the same effort as another for a lesser reward. For instance, if an employee works longer hours than her coworker, yet they receive the same salary, the employee would perceive inequity in the form o f under-reward. Conversely, with over-reward, a person will feel that his efforts to rewards ratio is higher than another persons, such that he is getting more for putting in the same effort, or getting the same reward even with less effort. While research suggests that under-reward motivates individuals to resolve the inequity, research also indicates that the same is not true for over-reward. Individuals who are over-rewarded often engage in cognitive dissonance, convincing themselves that their efforts and rewards are equal to anothers. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). According to the equity theory, individuals are motivated to reduce perceived inequity. Individuals may attempt to reduce inequity in various ways. A person may change his or her level of effort; an employee who feels under-rewarded is likely to work less hard. A person may also try to change his or her rewards, such as by asking for a raise. Another option is to change the behavior of the reference person, perhaps by encouraging that person to put forth more effort. Finally, a person experiencing inequity may change the reference person and compare him or herself to a different person to assess equity. For managers, equity theory emphasizes the importance of a reward system that is perceived as fair by employees. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.4.3 Goal-Setting Theory. The goal-setting theory posits that goals are the most important factors affecting the motivation and behavior of employees. This motivation theory was developed primarily by Edwin Locke and Gary Latham. Goal-setting theory emphasizes the importance of specific and challenging goals in achieving motivated behavior. Specific goals often involve quantitative targets for improvement in a behavior of interest. Research indicates that specific performance goals are much more effective than those in which a person is told to do your best. Challenging goals are difficult but not impossible to attain. Empirical research supports the proposition that goals that are both specific and challenging are more motivational than vague goals or goals that are relatively easy to achieve. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). Several factors may moderate the relationship between specific and challenging goals and high levels of motivation. The first of these factors is goal commitment, which simply means that the more dedicated the individual is to achieving the goal, the more they will be motivated to exert effort toward goal accomplishment. Some research suggests that having employees participate in goal setting will increase their level of goal commitment. A second factor relevant to goal-setting theory is self-efficacy, which is the individuals belief that he or she can successfully complete a particular task. If individuals have a high degree of self-efficacy, they are likely to respond more positively to specific and challenging goals than if they have a low degree of self-efficacy. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.4.4 Reinforcement Theory. This theory can be traced to the work of the pioneering behaviorist B.F. Skinner. It is considered a motivation theory as well as a learning theory. Reinforcement theory posits that motivated behavior occurs as a result of reinforces, which are outcomes resulting from the behavior that makes it more likely the behavior will occur again. This theory suggests that it is not necessary to study needs or cognitive processes to understand motivation, but that it is only necessary to examine the consequences of behavior. Behavior that is reinforced is likely to continue, but behavior that is not rewarded or behavior that is punished is not likely to be repeated. Reinforcement theory suggests to managers that they can improve employees performance by a process of behavior modification in which they reinforce desired behaviors and punish undesired behaviors. (http://www.csb.gov.hk/hkgcb/hrm/pdf.fcle/e-motivation). 2.5 People Motivation- Non – financial Notes Most business recognizes the need for non- financial methods of motivation. The main ones are described briefly below. 2.5.1 Job Enlargement Job enlargement involves adding extra, similar tasks to a job. In job enlargement, the job itself remains essentially unchanged. However, by widening the range of tasks that need to be performed, hopefully the employees will experience less repetition and monotony. With job enlargement, the employees rarely need to acquire new skills to carry out the additional task. A possible negative effect is that job enlargement can be viewed by employees as a requirement to carry out more work for the same pay. (http://tutor ). 2.5.2 Job Rotation Job rotation involves the movement of employees through a range of jobs in order to increase interest and motivation. For example, an administrative employee might spent part of the week looking after the reception area of business, dealing with customers and enquires. Some time might then be spent manning the company telephone switch board and then inputting data onto a database. Job rotation may offer the advantage of making it easier to cover for absent colleagues, but it may also reduce productivity as workers are initially unfamiliar with a new task. Job rotation also often involves the need for extra training. (http://tutor ). 2.5.3 Job enrichment Job enrichment attempts to give employees greater responsibility by increasing the range and complexity of tasks they are asked to do and giving them the necessary authority. It motivates by giving employees the opportunity to use their abilities to the fullest. Successful job enrichment almost always requires further investment in employee training. (http://tutor ). 2.5.4 Team Working and Empowerment Empowerment involves giving people greater control over their working lives. Organizing the labour force into team with degree of autonomy can achieve this. This means that employees plan their own work, take their own decision and solve their own problems. Teams are set targets to achieve and may receive and may receive rewards for doing so. Empowerment teams are an increasingly popular method of organizing employees at work. (http://tutor ).