Organizational Behavior• Organizational behavior can be defıned as the understanding,

prediction, and management of human behavior in organizations.• Organizational Behavior is field of study which explains how

employees behavior in an organization can be geared towards achieving organization’s objectives.

Week 3Personality

• Personality• A set of relatively permanent characteristics that makes a person

predictable and unique among others. • Or personality shows the total inner and outer potentiality of a person • Earlier psychologists concentrated on the observable traits or

characteristics, called the trait approach. On the contrary some concentrated on learning approaches. The third group concentrated on both traits and cognitions and their approach is called social cognitive approach to Personality.

Trait Approach to Personality• Trait theory A model of personality that seeks to identify the basic

traits necessary to describe personality.• Traits Consistent personality characteristics and behaviors displayed

in different situations. For example friendliness trait.

The Big Five Personality Traits• For the last two decades, the most influential trait approach contends

that five traits or factors—called the “Big Five”—lay at the core of personality. • Using modern factor analytic statistical techniques, researchers have

identified a five factors that determine Personality.• The five factors, described are openness to experience,

conscientiousness, extraversion, agreeableness, and neuroticism (emotional stability).

• The Big Five Personality Factors and Dimensions of Sample Traits• 1) Openness to experience• Independent—Conforming• Imaginative—Practical• Preference for variety—Preference for routine.• A person having greater openness trait will be more creative and self

motivated.

• Conscientiousness• Careful—Careless• Disciplined—Impulsive• Organized—Disorganized• A person with greater conscientiousness will follow time tables and

keep his room well organized and in order.

• Extraversion• Talkative—Quiet• Fun-loving—Sober• Sociable—Retiring• This trait has greatest relationship with leadership. Great leaders are

out going and friendly. They have many friends, and they gain energy from people. They are party throwers.

• Agreeableness• Sympathetic—Fault-finding• Kind—Cold• Appreciative—Unfriendly• Some people encourage others and they listen to others idea. They

have great concern for others. They are usually good team members who avoid conflict.

• Neuroticism (Emotional Stability)• Stable—Tense• Calm—Anxious• Secure—Insecure• People with lesser neuroticism are usually short-tempered , fickle,

tense and insecure( unpredictable). Their decisions are usually erroneous. Where as people with high neuroticism are usually high achievers, they achieve good marks, and perseverant.

Learning Approach to Personality• The psychodynamic and trait approaches we’ve discussed concentrate on

the “inner” person—a set of innate or inborn characteristics that forms a hidden person inside a visible person. • In contrast, learning approaches to personality focus on the “outer”

person. • To a strict learning theorist, personality is simply the sum of learned

responses to the external environment. Internal events such as thoughts, feelings, and motivations are ignored. • Although the existence of personality is not denied, learning theorists say

that it is best understood by looking at features of a person’s environment.

SKINNER’S BEHAVIORIST APPROACH• According to the most influential learning theorist, B. F. Skinner (who carried out

pioneering work on operant conditioning), personality is a collection of learned behavior patterns (Skinner, 1975). • “If I am sociable both at parties and at meetings, it is because I have been

reinforced for displaying social behaviors—not because I am fulfilling an unconscious wish based on experiences during my childhood or because I have an internal trait of sociability”• Their view is that humans are infinitely changeable through the process of learning

new behavior patterns. If we are able to control and modify the patterns of rein forcers in a situation, behavior that other theorists would view as stable and rigid can be changed and ultimately improved.

Social Cognitive Approaches to Personality• social cognitive approaches to personality emphasize the influence

of cognition—thoughts, feelings, expectations, and values—as well as observation of others’ behavior, on personality. • According to Albert Bandura, people can predict the possible

outcomes of certain behaviors in a specific setting by observing the others and noting its consequences.• This understanding comes primarily through observational learning —

viewing the actions of others and observing the consequences (Bandura, 1986, 1999).

• In summary we can say that personality is the story of nature and nurture.• Rigid inner inborn personality traits as well as the observation and

experiences from environment compel people to think, perceive and develop attitude / behavior according to the needs of the situation.

Sensation versus Perception• The five senses are considered to be vision, hearing, touch, smell, and

taste are constantly bombarded by numerous stimuli that are both outside and inside the body. Examples of outside stimuli include light waves, sound waves, mechanical energy of pressure, and chemical energy from objects that one can smell and taste. • Inside stimuli include energy generated by muscles, food passing

through the digestive system, and glands secreting behavior-influencing hormones.

• In this way, the human being uses the senses to experience color, brightness, shape, loudness, pitch, heat, odor, and taste. from objects that one can smell and taste. • However, researchers now know that ears, eyes, fingers, and the nose

are only way stations, transmitting signals that are then processed by the central nervous system. • As one molecular biologist declares, “The nose doesn’t smell—the

brain does.”

• A simple illustration may be seen by• Suppose there are two trains standing adjacent at a plat form. You are

sitting in train A and looking at train B. suddenly train B starts journey, at first you feel(sensation) that your train is moving but then you process the information and conclude (perceive) that the other train is moving. This is called Perception.• The same team member may be viewed by one colleague as a very

hard worker and by another as lazy.• In other words, the perceptual process adds to, and subtracts from,

the “real” sensory world.

ATTITUDES• Employee attitudes are the evaluations employees make, ranging from

positive to negative, about objects, people, or events. • For example, the statement, “I really think my job is great,” is a positive job

attitude, and “My job is boring and tedious” is a negative job attitude.• What Are the Main Components of Attitudes?• Typically, researchers have assumed that attitudes have three components: • cognition,• affect, and • behavior.

• The statement “My pay is low” is the cognitive component of an attitude—• a description of or belief in the way things are. It sets the stage for the more• critical part of an attitude—its affective component . • Affect is the emotional or feeling segment of an attitude and is reflected in the

statement “I am angry over how little I’m paid.” • Finally, affect can lead to behavioral outcomes. The behavioral component of an

attitude describes an intention to behave in a certain way toward someone or something—to continue the example, “I’m going to look for another job that pays better.”• Viewing attitudes as having three components—cognition, affect, and behavior—is

helpful in understanding their complexity and the potential relationship between attitudes and behavior.

Does Behavior Always Follow from Attitudes?• Early research on attitudes assumed they were causally related to behavior—

that is, the attitudes people hold determine what they do. Common sense, too, suggests a relationship. • Isn’t it logical that people watch television programs they like, or that employees

try to avoid assignments they find distasteful?• One researcher—Leon Festinger—argued that attitudes follow behavior. Did you

ever notice how people change what they say so it doesn’t contradict what they do? Perhaps a friend of yours has consistently argued that the quality of U.S. cars isn’t up to that of imports and that he’d never own anything but a Japanese or German car. But his dad gives him a late-model Ford Mustang, and suddenly he says U.S. cars aren’t so bad. Festinger proposed that cases of attitude following behavior illustrate the effects of cognitive dissonance ,

• Any incompatibility an individual might perceive between two or more attitudes or between behavior and attitudes. Festinger argued that any form of inconsistency is uncomfortable and that individuals will therefore attempt to reduce it. They will seek a stable state, which is a minimum of dissonance.• Research has generally concluded that people do seek consistency

among their attitudes and between their attitudes and their behavior.• They either alter the attitudes or the behavior, or they develop a

rationalization for the discrepancy.

What Are the Major Job Attitudes?

• We each have thousands of attitudes, but OB focuses our attention on a very limited number of work-related attitudes. These tap positive or negative evaluations that employees hold about aspects of their work environment. • Most of the research in OB has looked at three attitudes: job

satisfaction, job involvement, and organizational commitment. A few other important attitudes are perceived organizational support and employee engagement.

• Job Satisfaction is the most important attitude which describes a positive feeling about a job, resulting from an evaluation of its characteristics.

• Job Involvement measures the degree to which people identify psychologically with their job and consider their perceived performance level important to self-worth.

• Organizational Commitment. In organizational commitment , an employee identifies with a particular organization and its goals and wishes to remain a member. Most research has focused on emotional attachment to an organization and belief in its values as the “gold standard” for employee commitment.

• Employee Engagement. A new concept is employee engagement , an individual’s involvement with, satisfaction with, and enthusiasm for, the work she does. We might ask employees whether they have access to resources and the opportunities to learn new skills, whether they feel their work is important and meaningful, and whether their interactions with co-workers and supervisors are rewarding.

• Perceived Organizational Support Perceived organizational support (POS) is the degree to which employees believe the organization values their contribution and cares about their well-being (for example, an employee believes his organization would accommodate him if he had a child care problem or would forgive an honest mistake on his part).

Job Satisfaction• It is “a pleasurable or positive emotional state resulting from the appraisal of one’s job or job

experience. Simply we can say that a person who is happy with his job is satisfied from his job.

• There are various factors which leads to job Satisfaction. The most important are • 1. The work itself. The extent to which the job provides the individual with interesting

tasks, opportunities for learning, and the chance to accept responsibility the greater will be Job Satisfaction.

• The content of the work itself is a major source of satisfaction. For example, research related to the job characteristics approach to job design, shows that if a job provide autonomy in the design and execution of work as well as feedback from the supervisors, peers and customers the higher will be job satisfaction.

• Job satisfaction also depend upon the person for example one person will find teaching job interesting where as the others will not.

• 2. Pay. Employees will be satisfied from their pay and over all job if their pay meet their basic needs and is equitable with others in the organization and other organizations.

• Money not only helps people attain their basic needs but is also instrumental in providing upper-level need satisfaction. Employees often see pay as a reflection of how management views their contribution to the organization. Fringe benefitsare also important, but they are not as influential.

• For people who are poor or who live in poor countries, pay does correlate with job satisfaction and overall happiness. But once an individual reaches a level of comfortable living (in the United States, that occurs at about $40,000 a year, depending on the region and family size), the relationship between pay and job satisfaction virtually disappears. People who earn $80,000 are, on average, no happier with their jobs than those who earn closer to $40,000.

3. Promotion opportunities.• The chances for advancement in the organization also effect job

satisfaction.• Individuals who are promoted on the basis of seniority often

experience job satisfaction but not as much as those who are promoted on the basis of performance. • Additionally, a promotion with a 10 percent salary raise is typically not

as satisfying as one with a 20 percent salary raise.• Also a new trend has risen where a positive work environment and

opportunities to grow intellectually and broaden their skill base has for many become more important than promotion opportunities.

4. Supervision.• The abilities of the supervisor to provide technical assistance and behavioral

support also effect job satisfaction.• There seem to be main three dimensions of supervisory style that affect job

satisfaction. One is justice, that supervisor maintain amongst employees. • Second is employee-centeredness, which is measured by the degree to which a

supervisor takes a personal interest and cares about the employee. It involves checking to see how well the employee is doing, providing advice and assistance to the individual, and communicating with the associate on a personal as well as an official level.• The third dimension is participation. Supervisors shall allow their people to

participate in decisions that affect their own jobs. In most cases, this approach leads to higher job satisfaction.

Leadership/Supervisory Style according to Quran• Surah 3, Verse 159• Thus it is due to mercy from ALLAH that you deal with them gently,

and had you been rough, hard hearted, they would certainly have dispersed from around you; pardon them therefore and ask pardon for them, and take counsil with them in the affair: so when you have decided, then place your trust in ALLAH; surely ALLAH loves those who trust.

5. Coworkers, Work Group• Employees will be happy to work in teams with competent, friendly and

supportive people.• On the contrary people will be dissatisfied if they have no freedom at all in

work or they find it difficult to work along with each other.

•6. Working Conditions• Working conditions have a small effect on job satisfaction. If the working

conditions are good (clean, attractive surroundings, for instance), the personnel will find it easier to carry out their jobs. • If the working conditions are poor (hot, noisy surroundings, for example),

personnel will find it more difficult to get things done.

The Impact of Satisfied and DissatisfiedEmployees on the Workplace• What happens when employees like their jobs, and when they dislike

their jobs?• One theoretical model—the exit–voice–loyalty–neglect framework—

is helpful in understanding the consequences of dissatisfaction. Exhibit 3-5 illustrates the framework’s four responses, which differ along two dimensions: constructive/destructive and active/passive. The responses are as follows:

● Exit. The exit response directs behavior toward leaving the organization, including looking for a new position as well as resigning.● Voice. The voice response includes actively and constructively attempting to improve conditions, including suggesting improvements, discussing problems with superiors, and undertaking some forms of union activity.● Loyalty. The loyalty response means passively but optimistically waiting for conditions to improve, including speaking up for the organization in the face of external criticism and trusting the organization and its management to “do the right thing.”● Neglect. The neglect response passively allows conditions to worsen and includes chronic absenteeism or lateness, reduced effort, and increased error rate.

Job Satisfaction and Performance• Several studies have concluded that happy workers are more likely to be

productive workers. Some other said that there is no relationship between job satisfaction and performance but a review of 300 studies suggested that there is strong relationship between job satisfaction and performance.• One study by a management consulting firm separated large organizations

into high (more than 70 percent of employees expressed overall job satisfaction) and medium or low morale (fewer than 70 percent). • The stock prices of companies in the high-morale group grew 19.4 percent,

compared with 10 percent for the medium- or low-morale group.

Job Satisfaction and OCB• Job satisfaction should be a major determinant of an employee’s

organizational citizenship behavior (OCB). OCB means to be a good citizen of organization. Typical OCBs include helping co-workers, doing work for extra hours with out the expectation of reward, taking initiatives for improvements, etc. • Satisfied employees would seem more likely to talk positively about the

organization, help others, and go beyond the normal expectations in their job, because they want to reciprocate their positive experiences. • Researches show that job satisfaction is moderately correlated with OCBs;

people who are more satisfied with their jobs are more likely to engage in OCBs.

Job Satisfaction and Customer Satisfaction• Satisfied employees increase customer satisfaction and loyalty.• The first core value of online retailer Zappos, “Deliver WOW through service,”. • Employees are encouraged to “create fun and a little weirdness” and are given

unusual discretion in making customers satisfied; they are encouraged to use their imaginations, including sending flowers to dissatisfied customers, and Zappos even offers a $2,000 bribe to quit the company after training (to weed out the half-hearted).

• Two independent reports—one on the Transportation Security Administration (TSA) and the other on airline passenger complaints—argue that low employee morale was a major factor undermining passenger satisfaction. At US Airways, employees have posted comments on blogs such as “Our planes (sic) smell dirty” and, from another, “How can I take pride in this product?

Job Satisfaction and absenteeism• Job satisfaction is inversely related to absenteeism but not to a

greater extend because the rules and regulations of organizations may not allow employees to get absent.• However they do mentally and interest wide get absent and try to

avoid doing work or quality work as much as possible.

Job Satisfaction and Turnover• The relationship between job satisfaction and turnover is stronger

than between satisfaction and absenteeism. • The satisfaction–turnover relationship also is affected by alternative

job prospects. Job dissatisfaction is more likely to translate into turnover when employment opportunities are plentiful because employees perceive it is easy to move. • Finally, when employees have high “human capital” (high education,high ability), job dissatisfaction is more likely to translate into turnover because they have, or perceive, many available alternatives.

Week Four Perception and Decision Making • Perception is subjectively inferring results from the observations of real world.• Decision making occurs as a reaction to a problem. That is, a discrepancy exists between

the current state of affairs and some desired state, requiring us to consider alternative courses of action.

• For Example, If your car breaks down and you rely on it to get to work, you have a problem that requires a decision on your part. Whether an event is a problem or not or how urgent it is depend upon the perception of the perceiver(problem solver).

• Example: One manager may view her division’s 2 percent decline in quarterly sales to be a serious problem requiring immediate action on her part. In contrast, her counterpart in another division, who also had a 2 percent sales decrease, might consider that quite acceptable.

• So awareness that a problem exists and that a decision might or might not be needed is a perceptual issue.

Rational decision-making model• Rational decision-making model has six steps• 1. Define the problem.• 2. Identify the decision criteria.• 3. Allocate weights to the criteria.• 4. Develop the alternatives.• 5. Evaluate the alternatives.• 6. Select the best alternative.

Bounded Rationality(Satisfaction rather than Perfection)• Because the human mind cannot formulate and solve complex

problems with full rationality, we operate within the confines of bounded rationality . We construct simplified models that extract the essential features from problems without capturing all their complexity. • A simple process may frequently be more sensible than the traditional

rational decision-making model. To use the rational model in the real world, you need to gather a great deal of information about all the options, compute applicable weights, and then calculate values across a huge number of criteria. All these processes can cost time, energy, and money.

• For Example: When you considered which college to attend, did you look at every viable alternative? Did you carefully identify all the criteria that were important in your decision? Did you evaluate each alternative against the criteria in order to find the optimal college? The answers are probably “no.” Well, don’t feel bad. Few people made their college choice this way. Instead of optimizing, you probably satisficed.• Because the human mind cannot formulate and solve complex

problems with full rationality, we operate within the confines of bounded rationality. We construct simplified models that extract the essential features from problems without capturing all their complexity. 33 We can then behave rationally within the limits of the simple model.

Intuition• Intuition Perhaps the least rational way of making decisions is

intuitive decision making , an unconscious process created from distilled experience.• It occurs outside conscious thought; it relies on holistic associations,

or links between disparate pieces of information; it’s fast; and it usually engages the emotions.• Intuition is a highly complex and highly developed form of reasoning

that is based on years of experience and learning. • The key is neither to abandon nor rely solely on intuition, but to

supplement it with evidence and good judgment.

Common Biases and Errors in Decision Making• Overconfidence Bias It’s been said that “no problem in judgment and decision

making is more prevalent and more potentially catastrophic than overconfidence.• In one random-sample national poll, 90 percent of U.S. adults said they expected

to go to heaven. But in another random-sample national poll, only 86 percent thought Mother Teresa was in heaven.• Anchoring Bias The anchoring bias is a tendency to fixate on initial information• and fail to adequately adjust for subsequent information. It occurs because our

mind appears to give a disproportionate amount of emphasis to the first information it receives. Anchors are widely used by people in professions in which persuasion skills are important—advertising, management, politics, real estate, and law.

• When a prospective• employer asks how much you made in your prior job, your answer typically anchors• the employer’s offer. (Remember this when you negotiate your salary,• but set the anchor only as high as you realistically can.) Finally, the more• precise your anchor, the smaller the adjustment. Some research suggests• people think of making an adjustment after an anchor is set as rounding off• a number. If you suggest a target salary of $55,000, your boss will consider• $50,000 to $60,000 a reasonable range for negotiation, but if you mention• $55,650, your boss is more likely to consider $55,000 to $56,000 the range of• likely values.

Confirmation Bias• The rational decision-making process assumes we objectively gather

information. But we don’t. We selectively gather it. The confirmation bias represents a specific case of selective perception: we search out information that reaffirms our past choices, and we deduct information that contradicts them.

Availability Bias

• The availability bias is our tendency to base judgments on information easily available.• The availability bias can also explain why managers doing

performance appraisals give more weight to recent employee behaviors than to behaviors of 6 or 9 months earlier.• Events that evoke emotions, are particularly bright, or are more

recent tend to be more available in our memory, leading us to overestimate the chances of unlikely events. For example: fearing to fly on a plane after a recent airplane crash.

Escalation of Commitment• Another distortion that creeps into decisions is a tendency to escalate commitment.

Escalation of commitment refers to staying with a decision even when there is clear evidence it’s wrong.

• Many an organization has suffered because a manager determined to prove his or her original decision right continued to commit resources to a lost cause.

• Randomness Error • Decision making suffers when we try to create meaning in random events,

particularly when we turn imaginary patterns into superstitions. These can be completely false (“I never make important decisions on Friday the 13th”)

• or can evolve from a reinforced past pattern of behavior (Tiger Woods often wears a red shirt during a golf tournament’s final round because he won many junior tournaments wearing red shirts).

Risk Aversion

• This tendency to prefer a sure thing over a risky outcome is risk aversion . Risk-averse employees will stick with the established way of doing their jobs, rather than taking a chance on innovative or creative methods. • Sticking with a strategy that has worked in the past does minimize

risk, but in the long run it will lead to stagnation.

Perception and Individual decision Making• Perception Individuals base their behavior not on the way their

external environment actually is but rather on what they see or believe it to be.

● Whether a manager successfully plans and organizes the work of employees and actually helps them to structure their work more efficiently and effectively is far less important than how employees perceive the manager’s efforts.● Employees judge issues such as fair pay, performance appraisals, and working conditions in very individual ways. To influence productivity, we need to assess how workers perceive their jobs.

• Absenteeism, turnover, and job satisfaction are also reactions to an individual’s perceptions. Dissatisfaction with working conditions and the belief that an organization lacks promotion opportunities are judgments based on attempts to create meaning in the job.

● The employee’s conclusion that a job is good or bad is an interpretation. Managers must spend time understanding how each individual interprets reality and, when there is a significant difference between what someone sees and what exists, try to eliminate the distortions.

Motivation• Motivation is the process that account for an individual’s intensity, direction,

and persistence of effort toward attaining a goal.• Intensity describes how hard a person tries. This is the element most of us

focus on when we talk about motivation. However, high intensity is unlikely to lead to favorable job-performance outcomes unless the effort is channeled in a direction that benefits the organization. • Therefore, we consider the quality of effort as well as its intensity. Effort shall

be directed toward, and consistent with, the organization’s goals • Finally, motivation has a persistence dimension. This measures how long a

person can maintain effort. Motivated individuals stay with a task long enough to achieve their goal.

Types of Motives• Needs and motives are often interchangeably used, where as infact needs leads

to drives or motives aimed at incentives. Here we will consider both the same.• There are two broad types of needs or Motives• 1) Primary Motives: these are necessary for survival and continuity of race such

as water, food, shelter, cloths, medicine, and marriage etc.• 2)Secondary Motives• Whereas the primary needs are important for survival, the secondary drives are

learned and can be utilized in the interest of organization. These are unquestionably the most important to the study of organizational behavior.

• As a human society develops economically and becomes more complex, the primary drives give way to the learned secondary drives in motivating behavior.

• The best-known theory of motivation is Abraham Maslow’s hierarchy of needs . Maslow hypothesized that within every human being, there exists a hierarchy of five needs:

• 1. Physiological. Includes hunger, thirst, shelter, sex, and other bodily needs.• 2. Safety. Security and protection from physical and emotional harm.• 3. Social. Affection, belongingness, acceptance, and friendship.• 4. Esteem. Internal factors such as self-respect, autonomy, and achievement, and

external factors such as status, recognition, and attention.• 5. Self-actualization. Drive to become what we are capable of becoming; includes

growth, achieving our potential, and self-fulfillment.• When one level of need is partially satisfied it no longer motivates, the next higher need

level then serve to motivate.

Herzberg’s Two-Factor Theory

• Psychologist Frederick Herzberg wondered, “What do people want from their jobs?” He asked 200 accountants and engineers to describe, in detail, situations in which they felt exceptionally good or bad about their jobs. • The responses differed significantly and led Hertzberg to his two-

factor theory —also called motivation-hygiene theory.

• The factors that led to satisfaction were called “Motivators” and were mostly related to the job its self such as achievement, recognition, work-itself, responsibility, advancement, and growth.• The factors that lead to dissatisfaction were called “Hygiene” factors

and were mostly related to the environment of the job, Policy and administration, supervision, working conditions, salary, and relationship with peers.• The Herzberg study concluded that only Hygiene factors do not

motivate employees, Motivators shall also be provided.

Using Rewards to Motivate Employees• Rewards have two types • 1)Financial • 2)Non-Financial

• (1) what to pay employees (decided by establishing a pay structure),• (2) how to pay individual employees (decided through variable pay

plans and skill-based pay plans), • (3) what benefits and choices to offer (such as flexible benefits), and

What to pay employees?• Employees are usually divided into various grades and paid according to

these grades. This grading system is done on the basis of job evaluation in which the value of each job amongst other jobs in the organization is determined. For Example Basic Pay Scale (BPS) in the Public sector of Pakistan.• Pay shall be so fixed that it is equitable internally of same grades and in

accordance with the external market. Greater pay results in more satisfied, qualified, and retained employees yet Pays are the largest expense too.

Walmart manufacture most of its product(80%) in China where the average monthly salary is 12000 PKR.

How to Pay: Rewarding Individual EmployeesThrough Variable-Pay Programs• A number of organizations are moving away from paying solely on

qualifications or length of service. Piece-rate plans, merit-based pay, bonuses, profit sharing, gainsharing, and employee stock ownership plans are all forms of a variable-pay program , which bases a portion of an employee’s pay on some individual and/or organizational measure of performance. Earnings therefore fluctuate up and down.

Piece-Rate Pay• The piece-rate pay plan has been an old way of compensating production

workers with a fixed sum for each unit of production completed. • A pure piece-rate plan provides no base salary and pays the employee

only for what he or she produces. • Example: Tailors get Piece-Rate on suits they manufacture in Pakistan• Ballpark workers selling peanuts and soda are frequently paid this way. If

they sell 40 bags of peanuts at $1 each, their take is $40. • The harder they work and the more peanuts they sell, the more they

earn. The limitation of these plans is that they’re not feasible for many jobs for example clerical jobs.

Merit-Based Pay• A merit-based pay plan pays for individual performance based on

performance appraisal ratings. A main advantage is that people thought to be high performers can get bigger raises. If designed correctly, merit-based plans let individuals perceive a strong relationship between their performance and their rewards.• Most large organizations have merit pay plans, especially for salaried

employees.• IBM increases employees’ base salary based on annual performance

evaluations.

Bonuses• An annual bonus is a significant component of total compensation for many jobs. • But bonus plans increasingly include lower-ranking employees; many companies now

routinely reward production employees with bonuses in the thousands of dollars when profits improve.

• The incentive effects of performance bonuses should be higher than those of merit pay because, rather than paying for performance years ago (that was rolled into base pay), bonuses reward recent performance.

• When times are bad, firms can cut bonuses to reduce compensation costs. Steel company Nucor, for example, guarantees employees only about $10 per hour, but bonuses can be substantial.

• In 2006, the average Nucor worker made roughly $91,000. When the recession hit, bonuses were cut dramatically: in 2009, total pay had dropped 40 percent.

Skill Based Pay• Skill-Based Pay Skill-based pay (also called competency-based or

knowledge-based pay ) is an alternative to job-based pay that bases pay levels on how many skills employees have or how many jobs they can do.• It can increase greater flexibility in the organization.• This type of pay has not been relatively unsuccessful because

employees are paid on “what they have” not on “what they perform”

Profit-Sharing Plans• A profit-sharing plan distributes compensation based on some

established formula designed around a company’s profitability. • Compensation can be direct cash or, particularly for top managers,

allocations of stock options. • Profit-sharing plans at the organizational level appear to have positive

impacts on employee attitudes; employees report a greater feeling of psychological ownership.

Gainsharing• Gainsharing is a formula-based group incentive plan which aims at

improving productivity of the whole group and pay according to the performance. • Gainsharing differs from profit sharing in tying rewards to productivity

gains rather than profits, so employees can receive incentive awards even when the organization isn’t profitable. • Because the benefits add to groups of workers, high performers

pressure weaker ones to work harder, improving performance for the group as a whole.

Employee Stock Ownership Plans• An employee stock ownership plan (ESOP)• is a company-established benefit plan in which employees acquire

stock, often at below-market prices, as part of their benefits.• Research on ESOPs indicates they increase employee satisfaction and

motivation, but their impact on performance is less clear. • Basic philosophy behind ESOP plan is that employees will feel owner

ship for their organization.• ESOP has reported to be more successful when top management

were allotted a significant amount of stocks.

Non-Financial Rewards (Benefits)• Benefits are the means of addressing employee needs with out giving

them cash for example:• Accommodation, House rent, Medical facilities, transport facility, day

cares, recreational arrangements, shifting facilities, life insurance, schools for kids, etc.• Benefits costs organizations less then pays however they have a

significant impact upon the satisfaction and retention of employees.• Cherat cement for example has a good benefits program which even

pays the utility bills of its employees

• Intrinsic reward (recognition) is also very important as it plays vital role in the motivation of employees. Programs such as employee of the month or year, or champion of the year certificates must be provided.• Service shop on university road Peshawar has displayed the picture of

the best sale man of the month near their cash counter.

• I am more afraid of an army of 100 sheep led by a lion than an army of 100 lions led by a sheep. —Talleyrand

• We define leadership as the ability to influence a group toward the• achievement of a vision or set of goals.

Leadership Traits

Trait theoriesof leadership• Trait theories of leadership focus on personal qualities and characteristics. We recognize

leaders like South Africa’s Nelson Mandela, Virgin Group CEO Richard Branson, Apple co-founder Steve Jobs, and American Express chairman Ken Chenault as charismatic, enthusiastic, and courageous.

• Big five personality traits already discussed perhaps best represents Trait approach to leadership styles.

• Another trait that may indicate effective leadership is emotional intelligence (EI). People with high emotional intelligence display empathy and can sense other emotions.

• Empathetic leaders can sense others’ needs, listen to what followers say (and don’t say), and read the reactions of others.

• A leader who effectively displays and manages emotions will find it easier to influence the feelings of followers, by both expressing genuine sympathy and enthusiasm for good performance and by using irritation for those who fail to perform.

Behavioral theories of leadership• Trait research provides a basis for selecting the right people for

leadership.• In contrast, behavioral theories of leadership implied we could train

people to be leaders. Behavioral theories emphasis what leaders actually do.

Ohio State Studies• Ohio Studies which were conducted around 1940 concluded that there are two

basic leadership styles or structure.• Initiating structure leader with initiating structure primarily work for the

achievement of organizational goals with little consideration for employees. It includes behavior that attempts to organize work, work relationships, and goals. A leader high in initiating structure is someone who “assigns group members to particular tasks,” “expects workers to maintain definite standards of performance,” and “emphasizes the meeting of deadlines.”• Consideration Structure A leader high in consideration helps employees with

personal problems, is friendly and approachable, treats all employees as equals, and expresses appreciation and support. In a recent survey, when asked to indicate what most them at work, 66 percent of employees mentioned appreciation.

Michigan Studies• Leadership studies at the University of Michigan’s Survey Research Center had

similar objectives: to locate behavioral characteristics of leaders that appeared related to performance effectiveness. • The Michigan group also came up with two behavioral dimensions: the employee-

oriented leader emphasized interpersonal relationships by taking a personal interest in the needs of employees and accepting individual differences among them, and the production oriented leader emphasized the technical or task aspects of the job, focusing on accomplishing the group’s tasks. • These dimensions are closely related to the Ohio State dimensions. Employee-

oriented leadership is similar to consideration, and production-oriented leadership is similar to initiating structure. In fact, most leadership researchers use the terms synonymously. 15