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Jones: Introduction To
Business: How Companies
Create Value for People

II. The Human Side of

7. Motivating and
Managing People and
Groups in Business

© The McGraw−Hill
Companies, 2007



Motivating and Managing
People and Groups
in Business Organizations

Learning Objectives
After studying this chapter, you should be able to:

1. Understand the nature and sources of
work motivation and appreciate the way
motivation is under the voluntary control
of an employee.
2. Describe five different theories of work
motivation and identify how they work
together to determine work motivation.
3. Identify the characteristics of groups and
teams and distinguish between important
types of groups and teams.
4. Explain the factors that create highperforming groups and teams. 5. Identify the sources of organizational
conflict and understand how bargaining
and negotiation are used to resolve
conflicts between people and groups.

Why do you work harder in some classes than in
others? Something motivates you to do a better job.
Why do some of your classmates study more or less
than you do? The same thing is true in organizations.
Some people and groups are more motivated to
achieve goals than others. Also, why is there more
conflict within some groups than others? What causes
conflict and how can it be managed to benefit the
This chapter will help you understand how important it is for companies to motivate employees so they can achieve success for the company they work
for and for themselves.

Jones: Introduction To
Business: How Companies
Create Value for People

II. The Human Side of

7. Motivating and
Managing People and
Groups in Business

© The McGraw−Hill
Companies, 2007

A Question of Business
How to Run a Restaurant
What is Dick’s approach to motivating its employees?
Dick’s Drive-In Restaurants is a five-store, family-

straight out of high school. Its managers empha-

owned hamburger chain based in Seattle, Wash-

size that they look for a long-term commitment

ington. Founded in 1954, its owners have pur-

from employees and that in return, Dick’s will

sued an innovative approach to leadership and
motivation in the fast-food industry, which is
known for its high employee turnover and lowpaying jobs. From the beginning, Dick’s has always paid its employees well above the industry
average and offers them many benefits, too.
Dick’s pays its 110 part-time employees $8.75 an
hour, covers 100% of the cost of their health
insurance, and provides employees who have
worked at Dick’s for six months up to $10,000
towards their college education. Dick’s even pays
its employees their regular wages if they perform
four hours of volunteer work each month in the
local community. Dick’s competitors, on the other
hand, national hamburger chains like Wendy’s
and McDonald’s, pay their part-time employees
the minimum wage ($5.85 an hour) and offer
them no health insurance and few fringe benefits.
When asked why Dick’s adopts this approach Jim
Spady, its vice president answered, “We’ve been
around since 1954, and one thing we’ve always

help and support employees by providing them

believed is that there is nothing more important

with above-average pay, pension benefits, and

than finding and training and keeping the best

tuition money while they work their way through

people you possibly can.”

school. With its supportive “family style” leader-

Dick’s approach to leading and motivating its

ship, Dick’s managers and employees help train

employees begins when it recruits new hires

new recruits and quickly bring them up to speed.

Jones: Introduction To
Business: How Companies
Create Value for People


II. The Human Side of

7. Motivating and
Managing People and
Groups in Business

© The McGraw−Hill
Companies, 2007

Chapter Seven

Dick’s expects its employees to perform to the
best of their ability to get its burgers, and its customers, out the door as fast as they can. Dick’s employees don’t wait to be asked to do something. They are proactive and do whatever it takes to provide customers the freshest burger

Seattle has to offer.
Dick’s does not expect its employees to remain
with the company after they have graduated.
However, it does want them to stay with the company until they graduate. And, here lies the reason why Dick’s can afford to motivate its employees with generous pay and benefits. Employee turnover at the large burger chains is frequently

more than 100% a year. In other words, a typical
restaurant has to replace all of its employees at
least once a year. As a result, these chains have
to constantly hire and train new employees to get
them up to speed. This is expensive and significantly increases their operating costs.

Dick’s has discovered that if its employees
stay with the company for at least six months,
the resulting fall in operating costs more than
offsets the extra pay and benefits employees
receive. This makes for a “win-win” situation for
the company and its employees. From the company’s perspective, providing employees with greater rewards and a more satisfying work
experience actually helps boost the chain’s
productivity and its profitability. From the employees’ perspective, they enjoy the supportive “family” atmosphere that prevails in the restaurant, and they appreciate the good pay and benefits that make it easier for them to graduate from college. As Spady puts it, “Our philosophy is that if you want to be the best, you need the best people, and if you want the best

people, you have to pay for them.” If a person
has to work his or her way through college,
then Dick’s seems like a good place to do it.1 •


Every company strives to make and sell the kind of goods and services customers want to buy. A crucial determinant of a company’s ability to achieve this goal is its managers’ ability to motivate its human resources. The opening case described how managers at Dick’s Restaurants tried to create a work setting that encouraged employees to work hard, perform at a high level, and stay with the company. In this chapter, we examine how managers can motivate people and groups in order to do this. First, we examine the nature of work motivation and describe five theories that together explain what motivates people. Second, we move up from the individual level to the group and team level. We identify several different types of groups and teams and discuss the factors that can increase or decrease their members’ motivation. We then turn to the issue of why conflict occurs between people and groups in the work setting and discuss how conflict can reduce efficiency and effectiveness. Finally, we examine how managers can use bargaining and negotiation to help resolve conflict and increase a company’s performance. By the end of this chapter, you will understand the many issues managers face as they try to motivate employees, individually or in groups, to work hard and perform in ways that allow a company to pursue its business model successfully.

in Business

The principal determinant of an employee’s willingness to
work hard is his or her work motivation. Work motivation is
the psychological force within people that arouses their interest, directs their attention, and causes them to persist and work intensely to find a way to achieve their work goals. Managers, of course, try to motivate employees to work hard, but employees ultimately control how much effort they will expend. This concept is illustrated in Figure 7.1.

Recall from Chapter 3 that employees can choose to do their jobs in a way that just allows them to meet minimum work performance requirements. Alternately, employees can choose to search for ways to do their jobs more efficiently and effectively. The

Jones: Introduction To
Business: How Companies
Create Value for People

II. The Human Side of

© The McGraw−Hill
Companies, 2007

7. Motivating and
Managing People and
Groups in Business

Motivating and Managing People and Groups in Business Organizations

Figure 7.1


Proactive work behaviors that
go beyond job requirements and are
opportunities for an employee to find
ways to improve their work performance


Behavior that
meets minimum
work performance

work motivation The
psychological force within
people that arouses their
interest, directs their
attention, and causes
them to persist to achieve
their work goals.

inner circle in Figure 7.1 represents the minimum required work performance level. The two outer circles represent the level of performance employees could potentially achieve if they were motivated to perform at higher levels.

Employees know that if they do not perform at the minimum level, they risk being punished or sanctioned. This may motivate them to put in enough effort and work to reach this point. But what pushes employees to perform beyond this point? for example, to perform at the higher level represented by the length of Arrow A. And why would employees want to put in the enormous amount of effort and hard work needed to reach their peak performance level? represented by the length of Arrow B. This is where work motivation comes into play. A company’s owners and managers clearly want their employees to be motivated. But to achieve this, managers first need to understand the specific kinds of things that motivate them and then create a work setting in which this can happen. One principal factor that affects work motivation is a manager’s approach to leadership, which we discussed in Chapter 6. Other factors relate to the psychological needs that affect the way the person thinks and feels about his or her job and company. To understand how these factors affect motivation, we need to discuss five important theories that together give us a good picture of the various sources of employee motivation.

Maslow’s Needs Hierarchy Theory
Maslow’s needs
hierarchy theory
A theory that specifies
why and how people try to
satisfy their needs through
their behaviors at work.

As we discuss in Chapter 1, people engage in business and other forms of human activity to increase their utility, or satisfaction. Maslow’s needs hierarchy theory, illustrated in Figure 7.2, explains what specific needs people are trying to satisfy through their work behaviors. Abraham Maslow, a U.S. psychologist, first argued in the 1950s that unsatisfied needs motivate people to try to meet those needs in order to satisfy themselves.

At the base of Maslow’s hierarchy are physiological needs, like the need for food, water, clothing, and sex. Only when their physiological needs are satisfied can people turn their attention to satisfying their needs for security, like the need for protection and safety to help them and their families prosper over time. For example, to satisfy their safety needs, people might form clans and tribes to protect themselves from harm and improve their welfare.

Once their physiological and security needs are satisfied, people then search for ways to satisfy the next higher-level need, the needs for belongingness. At this point,

Jones: Introduction To
Business: How Companies
Create Value for People


Figure 7.2
Maslow’s Hierarchy
of Needs

II. The Human Side of

© The McGraw−Hill
Companies, 2007

7. Motivating and
Managing People and
Groups in Business

Chapter Seven
Types of Rewards and Outcomes
that Satisfy Unmet Needs
• Responsibility for profitability
• Challenging job assignments
SelfActualization • Control over organizational resources

Esteem Needs

• Promotion to senior positions
• Company recognition
• Recognition by stakeholders

Belongingness Needs

• Strong culture, values, and norms
• Supportive leader–employee relations
• Group cohesiveness

Security Needs

• Fringe benefits
• Safe working environment
• Job security

Physiological Needs

The desire for personal
self-fulfillment; that is, a
person’s desire to become
the best he or she is
capable of becoming.

• Pay
• Bonuses
• Company housing

Maslow argued, the desire for affection and love becomes increasingly important. Another kind of belongingness need is the desire to feel a part of something bigger than oneself, such as a clan, community, or nation. Patriotism and the love of one’s country are behaviors driven by the need for belongingness.

Once people have satisfied their belongingness needs, they can then search for ways to satisfy their esteem needs—the need to be recognized for their skills, expertise, and contributions to society. This need can be satisfied when people achieve a level of prestige and a measure of recognition from others. Achieving such social approval becomes a visible sign of their personal success.

Once people have satisfied these kinds of “lower-level” needs, Maslow argued, they become free to search for ways to satisfy their “higher-level” needs for self-actualization. Self-actualization is the desire for personal self-fulfillment—a person’s desire to be the best he or she can be. At this level, a person is driven to excel in an activity for its own sake; mastering an activity becomes an end in and of itself, in other words. Self-actualization differs from person to person, however. Some people might achieve self-actualization by continually striving to improve their occupational or other skills. A stamp collector, for example, might be driven to obtain every single stamp issued by a particular country. A runner might become obsessed with building the personal fitness necessary to compete in a marathon. Other people might achieve self-actualization by immersing themselves in the arts or by helping other people. A scientist might achieve self-actualization by working intensely for years to find a cure for a particular disease.

MANAGERIAL IMPLICATIONS Maslow’s hierarchy is useful in a business context because it identifies the many different kinds of needs people try to satisfy at work and clues as to how to motivate them. Some of the many rewards or outcomes that motivate employees are listed in Figure 7.2. These rewards include things like salaries, bonuses, and greater job responsibility and autonomy. Outcomes include being recognized for one’s successes, being in control of an organization’s resources, and having the power to determine the rewards other people receive. The point here is that different employees desire different things, and a manager’s job is to figure out what those things are. That said, employees will often be motivated to fulfill their basic needs before their higher-level needs. For example, if a firm lacks basic health-care insurance

Jones: Introduction To
Business: How Companies
Create Value for People

II. The Human Side of

© The McGraw−Hill
Companies, 2007

7. Motivating and
Managing People and
Groups in Business


Motivating and Managing People and Groups in Business Organizations

(a safety need), its employees are likely to be
more motivated to find jobs that offer these
benefits than they are motivated to meet the
firm’s goals.
The next four theories we discuss focus on
how employees can be motivated to work hard
in order to obtain the outcomes and rewards
they personally desire. These theories also describe how specific factors in the work setting influence this motivation.

Expectancy Theory
Expectancy theory argues that work motivation is a function of an employee’s belief (a) that working hard will allow the person to perform at a high level, and (b) that if the person does perform well, he or she will be rewarded for it (see Figure 7.3). According to this view, motivation is therefore a two-stage process. Several factors determine whether or not employees believe that working hard will lead to a superior job performance. Each of these factors is discussed next.

Managers must motivate their employees if they want them to perform well. What are some of the types of motivators a manager can use?

expectancy theory A
theory that argues that the
motivation of employees
depends upon whether
or not they believe that
performing at a high level
will lead to the rewards
they desire.

self-efficacy The belief
a person holds about his
or her ability to succeed at
a certain task or in a
particular situation.

Figure 7.3
Linkages in
Expectancy Theory

Employees’ past experience frequently provides them with information about how likely they are to succeed at a particular task. Employees who have repeatedly failed to achieve certain work goals in the past will tend to doubt their ability to achieve it in the future. As a result, their motivation to work hard will be diminished. The implication for managers is that they need to do everything they can to strengthen the effort-to-performance linkage. The idea is to encourage employees to believe that if they do apply themselves and work hard, they will succeed. For example, managers should provide support and training to employees who are underperforming. Perhaps more experienced employees can teach the underperforming employees how to do their jobs more efficiently. Expressing confidence in an employee is also an important way managers can strengthen the effort-to-performance linkage. In this way, managers can help increase an employee’s self-efficacy, the belief a person holds about his or her ability to succeed.

Second, to strengthen the effort-to-performance linkage employees also need to believe that nothing in the work situation, outside their control, will prevent their hard work from resulting in superior performance. Suppose the level of one employee’s job performance depends upon the job performance of other employees, such as when a carpenter assembles furniture parts made by two other carpenters. Suppose the carpenter has learned from past experience that the two other carpenters often make irregular table legs or table tops and that fitting together the pieces is a difficult, time-consuming process. The carpenter may come to believe that it will be impossible to assemble a high-quality table quickly, and, as a result, not be motivated to put forth more effort. The implication for managers is that they need to identify the factors in the work situation that weaken the effort-to-performance linkage and reduce motivation. If managers can discover what’s worrying employees, they can search for ways to help them succeed. For example, if the carpenter’s manager discovers that the co-workers’





Performance-toValued Outcome

Jones: Introduction To
Business: How Companies
Create Value for People


II. The Human Side of

7. Motivating and
Managing People and
Groups in Business

© The McGraw−Hill
Companies, 2007

Chapter Seven

poor job performance is the source of his or her lack of motivation, the search for a solution can begin. Perhaps the two carpenters need further training, or perhaps the real source of the problem is a low-level of group cohesiveness. A manager can then try to solve these problems.

second stage of motivation, according to expectancy theory, relates to how strongly employees believe that a superior performance will result in the outcomes they value. Managers therefore must reinforce the idea that there is a strong job performance-tooutcome linkage. One way to do this is to create an incentive structure that clearly links a certain performance level with certain rewards. This is the goal behind creating a piece-rate pay system. For example, in a piece-rate system, employees might be paid $2 for each of the first 50 units of a product they make each day, but then receive $4 for each additional unit they make over and above 50 units.

As we discussed earlier, different employees value different outcomes differently. For many people, pay is their principal incentive. These employees will therefore respond positively to attempts to strengthen the performance-outcome linkage by using money as the reward. By contrast, other people might be more motivated by jobs that are more interesting or flexible, offer further training, and greater responsibility over the firm’s resources. Managers need to consider how the various components of a company’s incentive system work together to encourage employees to perform at a high level. Consider the issue of promotion. Some companies predominantly hire experienced managers from other companies to fill vacant job positions. If this is a common company practice, however, the company’s employees who are motivated by the prospect of being promoted and earning a higher salary will come to believe that there is little chance of this occurring. The performance-to-promotion outcome linkage will be weak, and these employees will be more inclined to leave the company. This is why companies are often advised to “promote from within.” By contrast, when employees are already being paid relatively well for what they do—like students working at Dick’s Restaurants are—managers might need to reward them differently. For example, Dick’s might offer students more flexible work hours or extra days off to study or take trips home.

Employees also must believe that nothing in the work setting outside their control will prevent them from obtaining the valued outcomes they seek. Suppose an employee has a manager who is well known for taking credit for the achievements of his or her subordinates. In this case, the manager’s employees will have no motivation to come up with better ways to do their jobs because they do not expect to be recognized for their superior performance.

Finally, it is important to understand that even if
a company’s employees have strong effort-to-performance and performance-to-outcome expectancies, this does not guarantee they will be motivated to
behave the way the company desires. Employees are
also motivated by the needs they can satisfy outside
of the workplace, so managers must factor this into
their decision making. If employees value time with
their families, for example, then satisfying this need
will have an impact on how much effort they exert
and the performance level they aim for. These employees will not necessarily be motivated to perform at a high level if their jobs are so demandin...

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