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Public Management Incentives and Motivations Wednesday, May 3, 2017 Hun Myoung Park, Ph.D. Public Management & Policy Analysis Program Graduate School of International Relations Big Question (Behn 1995) Micromanagement Motivation: How can public managers motivate public employees to work energetically and intelligently towards achieving public purposes? How can the legislature control the executive, and how can political managers control civil servants (principal-agent problem)? Measurement 2 Basic Questions What do employees want to get from organizations and society? Why do people want to work for government? 3 How To Motivate? Organizations and their employees exchange (contribution and rewards) Reward (carrot) and penalty (stick) based on fair and accurate performance appraisal Need-incentive fit: What does he/she want to get? Provide proper incentives/disincentives. 4 Need, Motive, and Value • Need is a resource or condition required for the well-being of an individual • Motive is a force acting within an individual that causes him to see to obtain or avoid some external object • Value is an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence. 5 Employees’ Needs Murray’s List of Basic Needs (1938) Abasement Achievement Affiliation Aggression Autonomy Counteraction Defendance Dominance Exhibition Harm avoidance Nurturance Order Play Rejection Sentience Sex Succorance Understanding Maslow’s Need Hierarchy (1954) Alderfer’s ERG Model (1972) Self-actualization needs Esteem needs Belongingness social needs Safety needs Physiological needs Growth needs Relatedness needs Existence needs 6 Incentive for Employees Which incentives do organizations provide to their employees? 7 Types of Incentives 1 Incentive Type Barnard (1938) Specific Incentives Material inducements Personal, nonmaterialistic inducements Desirable physical conditions of work Ideal benefactions General incentives Associational attractiveness Customary working conditions Opportunity for feeling of enlarged participation in course of events Condition of communion Definitions and Examples Incentives “specifically offered to an individual” Money, things, physical conditions Distinction, prestige, personal power, dominating position “Satisfaction of ideals about nonmaterial future or altruistic relations” (pride of workmanship, sense of adequacy, altruistic service for family or others, loyalty to organization, esthetic and religious feeling, satisfaction of hate and revenge) Incentives that “cannot be specifically offered to an individual” Social compatibility, freedom from hostility due to racial, religious differences Conformity to habitual practices, avoidance of strange methods and conditions Association with large, useful, effective organization Personal comfort in social relations 8 Types of Incentives 2 Incentive Type Simon (1948) Incentives for employee participation Incentives for elites or controlling groups Clark and Wilson (1961) and Wilson (1973) Material incentives Solidary incentives Definitions and Examples Salary or wage, status and prestige, relations with working group, promotion opportunities Prestige and power Tangible rewards that can be easily priced (wages and salaries, fringe benefits, tax reductions, changes in tariff levels, improvement in property values, discounts, services, gifts) Intangible incentives without monetary value and not easily translated into one, deriving primarily from the act of associating Specific solidary incentives Incentives that can be given to or withheld from a specific individual (offices, honors, deference) Collective solidary incentives Rewards created by act of associating and enjoyed by all members if enjoyed at all (fun, conviviality, sense of membership or exclusive-collective status or esteem) Purposive incentives Intangible rewards that derive from satisfaction of contributing to worthwhile cause (enactment of a law, elimination of government corruption) 9 Incentive & Organization Type 1 Clark and Wilson (1961) Material incentives: tangible rewards, often monetary – wages, fringe benefits, patronage Solidary incentives: intangible rewards from the act of association – sociability, status Purposive incentives: intangible rewards related to the goals of the organization – e.g., working on an election of a supported candidate 10 Incentive & Organization Type 2 Utilitarian organizations rely primarily on material incentives (business firms, labor unions). – Clark and Wilson predict they will have fairly precisecost accounting machinery (Scott p. 172). – Managers will focus on obtaining necessary material incentives. – Conflicts will be about distribution. – Organizational goals will be secondary to incentives. 11 Incentive & Organization Type 3 Solidary organizations (service-oriented voluntary organizations and social clubs) are places where people make contributions in return for sociability and status. – Executive efforts at securing prestige, good fellowship – Organizational goals are non-controversial and socially acceptable. – These organizations tend to be less flexible and more public in actions and decisions. 12 Incentive & Organization Type 4 Purposive organizations rely on their stated goals to attract and retain people (Clark and Wilson, 1961). – Executives need to maintain inducements, but when goals are lofty this is difficult to sustain. – Often their efforts fail initially or intermittently (don't elect candidate, don't stop hunger, etc.). – Sometimes the goals are too vague or only support a minority of interests. 13 Motivation Psychological forces that determine the direction of behavior, level of effort, level of persistence. Motivation is NOT unchangeable Preferences are not exogenous (given by outside) but endogenous (socialization) 14 Intrinsic vs. Extrinsic Motivation Intrinsic motivation – Comes from doing the work itself Extrinsic motivation – To acquire materials or social rewards – To avoid punishment – Workers’ own personal characteristics; – Nature of their job – Nature of organizations 15 Work Motivations 1 A person’s desire to work hard and work well--to the arousal, direction, and persistence of effort in work settings. Motivation alone does not determine performance. 16 Work Motivations 2 A general idea (umbrella concept) rather than a precisely defined research target. – Organizational commitment – Job involvement – Organizational climate – Leadership practices 17 Motives 1 Perry & Wise (1990) Rational (instrumental) motives are grounded in enlightened self-interest and are present in individuals who believe that their interests coincide with those of the larger community. They personally identify with some programs and express a commitment to public policy or special interest advocacy. 18 Motives 2 Norm-based motives describe a desire to serve the public interest, a duty and loyalty to the government, and a concern for social equity. Affective motives, such as altruism, are characterized by a willingness or desire to help others. 19 Content vs. Process Theory Content theories of motivation are concerned with analyzing the particular needs, motives and rewards that affect motivation. Process theories of motivation concentrate on psychological and behavioral processes behind motivation. Distinctions can overlap and need not be taken as confining. 20 Content Theories Maslow’s hierarchy of needs (1954) McGregor’s Theory X and Y (1960) Herzberg’s two factor theory (1968) McClelland’s 3 motivational needs (1961) Alderfer (1972): growth, relatedness, and existence needs. J. Stacy Adams’ equity theory (1965) 21 Maslow: Hierarchy of Needs A theory in psychology proposed in his 1943 paper A Theory of Human Motivation. – Often depicted as a pyramid consisting of five levels. The first lower level is associated with the most basic needs, physiological needs. – Higher needs only motivate behavior when the lower needs in the pyramid are met. – Once an individual has moved upwards to the next level, needs in the lower level will no longer be prioritized and no longer motivate behavior. 22 Maslow: Hierarchy of Needs SelfActualization Esteem Needs Belongingness & Love Needs Safety Needs Physiological Needs 23 McGregor: Theory X and Y • Theory X assumes workers lacking capacity for self-motivation and self-direction and calls for control • Theory Y assumes workers having high-order needs (growth, development, interesting work and self-actualization) • In theory Y, managers need participative management techniques, decentralized decision making, performance evaluation procedures, job enrichment program. 24 McGregor: Theory X and Y supervisor supervisor employee employee Theory X – Top down; manager is dictatorial, controlling Theory Y – Bottom up; manager enables, gives responsibility 25 Herzberg: Two-Factor Theory • Hygiene needs (physical and psychological context--pay, job security, etc.) • Hygiene needs cause job dissatisfaction when not satisfied, but they does not stimulate job satisfaction. • Motivator needs (work itself; intrinsic needs) will result in high motivation once satisfied. 26 Herzberg: Two-Factor Theory Hygiene Factors Company policy and administration Supervision Relationship with supervisor Working conditions Salary Relations with peers Personal life Relations with subordinates Status Security Motivators Achievement Recognition The work itself Responsibility Growth Advancement 27 Herzberg: Two-Factor Theory high 10 9 high on motivator scale, low on hygiene scale high on motivator scale, high on hygiene scale motivators 8 Employees are motivated. Job fulfills higher order needs; but 7 extrinsic factors, such as pay, are low so employee is dissatisfied. 6 Best Case: Employees are motivated and satisfied, find job fulfilling; extrinsic factors are satisfactory (e.g. pay, work conditions) 5 4 low on motivator scale, low on hygiene scale low on motivator scale high on hygiene scale 3 Worst Case: Employees are 2 unmotivated, extrinsic factors (e.g. pay and work conditions) 1 also unsatisfactory low 0 1 2 3 4 Employees are not highly motivated but are satisfied with other factors of job (e.g. pay, flexible hours, etc.). 5 hygiene factors 6 7 8 9 10 high28 Adams: Equity theory Perception of fairness of their work outcomes relative to work inputs Compare his own outcome-input ratio (outcome/income) with others’ (referents) ratios Equity, underpayment, overpayment Barnard’s exchange of incentives and contributions in organizations 29 Equity Theory Scale Job Inputs Job Outputs Job, time, effort, ability flexible, commitment honest, collegiality, heart, integrity, respecting Pay check, benefits, vacation time, security, recognition, responsibility, respect, sense of purpose, sense of achievement perceived balance Input and motivation are reduced when perception of fairness/ equity (outputs) is tipped, i.e. when employee perceives effort is greater than reward 30 Process Theories • Vroom: Expectancy Theory – Expectancies and dependent variables – Expectancy theory in public organizations • Skinner: Operant Conditioning and Reinforcement • Bandura: Social Learning (cognitive) Theory • Locke: Goal-Setting Theory 31 Vroom: Expectancy Theory 1 An individual considering an outcome sums up the values of all outcomes that will result from the action, with each outcome weighted by the probability of its occurrence. Theory draws on the classic utilitarian ideas (maximizing pleasure and minimizing pain) Integrates elements of needs, equity and reinforcement theories Individual workers differ in their preferences for outcomes ire materials or social rewards 32 Vroom: Expectancy Theory 2 F= ∑(E ij Vj) V j = ∑(V k I jk ) F= The force acting under individual to perform act i. Eij=The expectancy or perceived probability of any effort will lead to an outcome (act i will lead to outcome j) Vj= Valence of the outcome j I= The instrumentality of the outcome j for attainment of outcome k V= The valence of outcome k 33 Vroom: Expectancy Theory 3 Valence refers to the emotional orientations people hold with respect to outcomes/rewards. How desirable each of the outcomes available from a job is to a person Expectancy: Employees have different expectations and levels of confidence about their capabilities. Perception that high levels of effort lead to high performance. Instrumentality refers to the perception of employees with respect to whether outcomes/rewards will actually result. High performance leads to the attainment of desired outcome. 34 Vroom: Expectancy Theory 4 • Expectancies as Dependent Variables – Expectancy type questions about relationships between performance and pay, job security, promotion, and incentives often show association with reported work satisfaction and effort. • Use in Public Organizations – The underlying principles still underpin many civil service reforms and government pay systems. 35 Operant Conditional Theory 1 Operant conditional theory by Skinner (1953) Operant conditioning, i.e. the use of consequences to modify the occurrence and form of behavior Relationship between observable behavior and contingencies of reinforcements To link the performance of specific behavior to the attainment of specific outcomes Punishment is less efficient and effective in shaping behavior. 36 Operant Conditional Theory 2 Positive reinforcement (give desired outcome); negative reinforcement (give undesired outcome) Operant extinction (curtail the performance of dysfunctional behaviors) Punishment (dangerous, illegal or unethical behaviors to be eliminated immediately) Positive reinforcement provides the most efficient means of influencing behavior. 37 Operant Conditional Theory 3 • Low ratio reinforcement schedule produces rapid acquisition of the behavior but more rapid extinction when the reinforcement stops. • Intermittent reinforcement, especially in highly variable intervals or according to a variable ratio schedule (reinforcement after long varying periods or after varying numbers of occurrences), requires more time for behavior acquisition, but extinction occurs more slowly when the reinforcement seasons. 38 Social Learning Theory 1 Developed by Albert Bandura (1978) et al. Reflects value and limitations of operant conditioning and behavior modification. Draws from behavior modification, but puts greater emphasis on internal cognitive processes, like goals and a sense of self efficacy. Gives attention to forms of learning and behavior change that may not be tied to external environment 39 Social Learning Theory 2 Individuals learn in ways other than through extra reinforcement, including: – modeling the behavior of others – vicarious experiences – mental rehearsal and imagery – self-management through setting goals for oneself 40 Goal-setting Theory 1 Theory simply states that difficult goals lead to higher performance than easy goals, no goals, or vague goals. Goals focus behavior and motivate individuals to achieve desired and states. Goals may direct attention, intensify effort, intensify persistence, spark creativity in problem solving As the value of a goal increases, the commitment to the goal increases. 41 Goal-setting Theory 2 Commitment to the goals and feedback are also necessary to performance. Assignment of difficult (challenging; hard but not impossible to attain) goals enhances performance because goals appeal to motive and desire to achieve (Locke and Latham, 1990). – Goals provide a sense of purpose and create standards for evaluating performance . – Participation in goal setting is not clearly linked to higher levels of motivation. 42 Goal-setting Theory 3 Goal setting works best with management support and requires effective leadership. People should be committed to goals. The manager should stress that the goals are important (have personal value) and are attainable. Empower employees to develop strategies and tactics for achieving goals Beware of goal overload Mix qualitative and quantitative goals 43 Goal-setting Theory 4 Assign responsibility for achievement of goals Feedback stimulates the accomplishment of goals. The greater the success, the greater the satisfaction. Paradox: More difficult goals are less likely to be achieved, leaving people unsatisfied; this, in turn, fosters ambition, pushing people to strive to achieve further. 44 Lessons from Motivation Study • Given diversity of individual preferences, there is no one best incentive that fits all cases • Examine individual preferences and find out more salient ones in an institutional setting • Try to measure performance although acknowledging its difficulty and danger • Try to link performance and incentives • As individual preferences change (country, generation…), incentives need to change as well 45