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Incetive Schemes and their operations

Introduction

In any organization, it‘s the duty of senior management to get work done from the work
force of the organization to achieve its objectives. Success in the application of work
incentives aimed at generating higher levels of performance and production output will
largely depend on establishing a careful balance of the many inter-related motivating
factors necessary in achieving worker satisfaction often further complicated by prevailing
nature of construction itself.
Definition: The art or activity of developing desire to work amongst the workers or
employees to achieve the desired goal is known as
motivation. It can as well be defined
as ―taking work from persons/people, create interest in them for the work, maintain that
interest and instigate them to development.‖ The most important task of management,
therefore, is to motivate employees so that they may direct their energies for the
accomplishment of organization goals.


4.1 Importance of Motivation


Motivation is important in the following ways:-
- It stimulates the workers to improve their performance and increase in
efficiency of operations
- It inspires action by creating interest in the work
- It gives job satisfaction and acceptance of organizational goals
- It removes frustration and improves individual relations
- It develops sense of responsibility to achieve the desired goal with maximum
efficiency and minimum wastage.
- It reduces the tendency of remaining away from work and reluctance on the part
of workers.
- Lessens labour turn over, attraction of new work force and reduces absenteeism
- Increases production and productivity
- Basis of cooperative – there is job satisfaction such that the workers‘ interest for
the organisation increases and hence a sense of cooperation is developed.


4.2 Simple Model of Motivation


The purpose of behaviour is to satisfy needs. A need is anything that is required, desired
or useful.
A want is a conscious recognition of a need. A need arises when there is a
difference in self- concept (the way I see myself) and perception (the way I see the world
around me). The presence of an active need is expressed as an inner state of tension from
which the individual seeks relief.


4.3 Techniques of motivation


The following are the important techniques of motivation:1. Monetary rewardMoney as a motivator can never be passed. Whether in the form of wages, piecework or
any other incentive pay, and any other thing that may be given to a person for
performance, money is important.
Money is valuable because of the goods and services that it will purchase. This is its
economic value as the medium of exchange; however, money is also a social medium of
exchange. It is also an indication of one employee‘s relative status compared with that of
other employees.


2. Job enlargement


Job enlargement seeks to motivate employees by enlarging the scope of the job.
Increasing the number and variety of tasks that an individual performs succeeds in
motivating the employees because it alters the job content and tends to remove the
dullness associated with performing repetitive operations.


3. Job enrichment


This technique of motivation was developed by Hertzberg when he pronounced his
―motivation-hygiene theory‖. The assumption is that in order to motivate the workforce,
the job must be designed to provide opportunities for achievement, recognition,
responsibility and growth. Job enrichment is distinguished from job enlargement in that
the latter technique attempts to make a job more varied by removing the dullness
associated with performing repetitive operations. In job enrichment, the attempt is to
build into jobs a higher sense of challenge, importance and achievement. To enrich a job,

a supervisor can introduce new or more difficult tasks, assign individuals specialized
tasks that enable them to become experts, or grant additional authority to employees.


4. Participation


Participation is mental and emotional involvement of people in group situations that
encourages them to contribute to group goals and share responsibility for them. The
motivational basis is that people like to be asked their opinion and know that their ideas
and benefits have some weight in the ultimate management action taken. The underlying
assumptions are; people derive satisfaction from being a part of the management action,
from doing as effective a job as practicable and having self control rather than
organizational control. By using participation, greater acceptance to change is
accomplished.


5. Work accomplishment environment


This includes a work climate which has the presence of pressure to get things done. When
this exists to a high degree the chances of motivating is usually high. The need to
achieve, getting projects finished and the value of time are prominent attributes that make
for high work accomplishment environment.


6. Effective criticism


This can be spring bound for improving and employees‘ behaviour and performance.


7. Praise


Praise and credit for work done is a good and effective method of motivation. It satisfies
ego and esteem needs. It is therefore highly desirable that an employee who has done a
good job should be commended for his performance.


8. Imprisonment


4.4 Theories of Motivation


The main incentive methods adopted in the construction industry are explained in the
contexts of the theories developed by Maslow, McGregor, and Hertzberg.
1. Maslow (1954) suggested that people seek to satisfy needs sequentially as shown
below, arguing that as each is gratified, then a new set emerges, implying a process of
self-motivation. According to him, there are five types of needs which prompt man to
action. They are as follows:


Physiological needs: In a modern society, the basic needs such as provision of food,
clothing, housing etc which lie at the root of national economic well being emphasized
through concerns to generate employment, when satisfied in due course appear to lead to
even greater demands like better working conditions, shorter hours etc. Further more, the
common desire for individuals to try and progress in a job; gain respect both from the
employer and fellow workers, and identify with a particular skill seem to provide
additional support to Maslow‘s theory.


Safety/security needs: Once physiological needs are satisfied, safety or security needs
emerge and become dominant. Safety needs are felt by people who feel threatened either
by fear of physical danger or deprivation of basic physiological needs. The operation of
safety needs is in evidence on attempts to seek job security, insurance, pensionary
benefits and so on.


Social needs: The need to seek affiliation and affection (love) of one‘s fellow beings is
related to the social nature of human relationship. Social needs point to man‘s urge for
meaningful companionship with fellow beings and are concerned with mental health of
the organization. The organization helps to satisfy employees‘ social needs through sports
teams, parties and celebrations. The supervisor can help fulfil social needs by showing
direct care and concern for employees.


Esteem needs: These desires for self expression, self respect, and respect or recognition
by others. According to Maslow, most people feel the need to be rated higher than others

and seek recognition and respect on that account. Satisfaction of esteem needs produces
feelings of self confidence, prestige, power and control. The organization helps to satisfy
employees‘ esteem needs by marching the skills and abilities of the employee on the job.
The supervisor can help fulfil esteem needs by showing workers that their work is
appreciated.


Self actualization needs: These are desires for self fulfilment and the realization of an
individual‘s full potential. They represent the desire to become more and more of what
one is, to become everything that one is capable of becoming. The supervisor can help
fulfil self-actualisation needs by assigning tasks that challenge employees‘ minds while
drawing on their aptitude and training.
Fig.4 Maslow‟s Hierarchy of Human needs
self actualization
,
self fulfilment.
Esteem needs; self expression,
confidence, - to feel worthy and
respected. reputation, recognition etc.
Social needs; To belong, recognition,
desire for affiliation in a group or class,
friendship etc
Safety/security needs; job
security, insurance, pension
benefits, grievance handling etc.
Physiological needs: food,
shelter, clothing etc


2. Hertzberg‟s two-factor Theory of Motivation.


Herzberg et al., (1960),
discovered that people‘s feeling of dissatisfaction was related to
the environment in which they were working. These included such things as: Physical
working conditions, Job security, Salary/ Wages, Relation with superiors and fellow
workers, Company policy, rules and procedures, Fringe benefits etc.
Conversely, when respondents reported a feeling of happiness, they frequently described
factors related to their jobs, to events that indicated that they were successful in the
performance of their jobs and to possibility of professional growth. Hertzberg labelled the
factors that prevent satisfaction as
hygiene factors and those that bring about satisfaction
as
motivators.


Job satisfaction (motivator factors):AchievementRecognitionThe work itself/ challengingTaking responsibilityThe chance to advance (growth)


Satisfaction comes from motivators that are intrinsic or job content such as achievement,
recognition, advancement, responsibility, the work itself and growth possibilities.
Herzberg uses the term
motivators for job satisfiers once they involve job content and
the satisfaction that results from them. Motivators are considered job
turn-ons. They are
necessary for substantial improvements in work performance and move the employee
beyond satisfaction to superior performance. Motivators correspond to Maslow‘s higherlevel needs of esteem and self-actualisation which cannot be fully satisfied and they will
continue to motivate individuals for a long time.


Job dissatisfaction
(Hygiene factors)


Working conditionsJob securitySalary/ WagesRelation with superiors


Company policy/administrationFringe benefits.
He also concluded that workers could become demotivated when other factors were
unsatisfactory, these being termed
“hygiene” factors and mainly relate to work
environment. Hertzberg uses the term hygiene for these factors because they are curable
(preventable) in nature. Hygiene factors are considered job stay-on because they
encourage an employee to stay on job. Unfavourable factors about the environment bring
about poor job attitude and if they deteriorate below the level employees consider
acceptable, job dissatisfaction will develop. Improvement in them will serve remove
obstacles to positive job attitude.


3. The Theory of Douglas McGregor


There are certain conventional assumptions relating to motivation of people in the
organization that are widely accepted as valid. These assumptions are termed by
McGregor as ―Theory X‖.
Assumptions of Theory XThe average man by nature is indolent and has an inherent dislike for work.Workers do not try to do work or improve the work through interest but wait for
instructions and directives.
There is lack of ambition. People avoid responsibility and prefer to be led.To get work from employee, he must be persuaded, rewarded, punished and
rebuked and hence through fear he becomes ready to do the work.
Workers care more for security and hence they work slowly.Workers act on the basis of financial greed. If they are paid more wages, they will
take more interest in work.
Management does not give importance to labour.Managers are poor listeners and seek culprits for failure.The theory has authority as supervisor – labour has no right to give opinion,
neither can do any work by his own will without directions.


Management by direction and control (Theory X), regardless of its hard or soft approach,
is ineffective to motivate people whose important needs are social and egoistic. Once
lower order needs are satisfied, rewards, promises, incentives, or threats and coercion- the
devices used by management under Theory X, cease to motivate people.
Having established the inadequacy of Theory X McGregor suggested a different theory of
managing people based on more adequate assumptions about human nature and
motivation. He labelled that attitudinal pattern of manager as ―Theory Y‖. He developed
theory (Y) suggesting that work is natural, people wish to achieve goals and obtain
intrinsic satisfaction when committed to the work objectives, and further more seek
responsibility by contributing to problem solving when properly motivated.
The important assumptions of Theory Y are:
a) Every work is interesting
b) Man is not inherently passive or resistant to organizational needs. The motivation,
the potential for development, the capacity for assuming responsibility, the
readiness to direct behaviour towards organizational objectives are all present in
people. It‘s the responsibility of management to make it possible for people to
recognize and develop these human characteristics for themselves.
c) Incentives, threats or external control are not only means of motivating people to
work for organizational objectives.
d) Workers are not instigated to work by fear or strict discipline; they feel
responsible for the work for which they are appointed.
e) For work executed, its necessary that it should be recognized
f) There is no tendency to escape from responsibility, and there is cooperation to
solve problems of the enterprise.
g) Theory is based on democratic principles and everybody has equal chances. (no
segregation, nepotism)
h) Manager works as a leader and gets more good results by taking advice from
personnel and management takes personnel on equal footing for advice.


Many managers tend towards theory x, and generally get poor results. Enlightened
managers use theory y, which produces better performance and results and allows people
to grow and develop.


Factors that affect work motivation include individual differences, job characteristics and
organizational practices. Factors that affect motivation include: individual differences;
job characteristics and organizational practices. Individual differences are the personal
needs, values, attitudes, interests and abilities that people bring to their jobs. Job
characteristics are the aspects of the position that determine its limitations and challenges.
Organizational practices are the rules, human resource policies, and managerial practices
and rewards systems for an organization. Supervisors must consider how these factors
interact to affect employee job performance.


Maslow believed ultimately a level of self fulfilment can be attained through purely
creative work, but would in practice be of limited opportunity given the conditions
prevailing in most paid employment.
Non – financial incentives – The incentives involved are fairly intangible, and related to
Maslow‘s higher needs, particularly the fulfilment of those defined by Herberg as the
―intrinsic motivators‖. Thus the incentives offered acknowledge the importance of the
individual and recognise the need for group participation to provide social satisfaction.


Motivation methodsMotivationNon financial Financialie social, psychological
via self esteem and job
satisfaction
Basic wages salary Bonuses
Statutory controls
Voluntary negotiation
and bargaining
Semi financial incentivesWhere jobs are difficult to measure in straight forward productive terms eg managerial
and supervisory positions, practical experience indicates that, as far as the financially
hygiene motivators are concerned, these appear to function best when introduced through
fringe benefits in the form of contributory pension scheme, holidays with pay, restaurant
facilities, medical insurance, sports facilities, company cars, paid telephone bills, power
bills etc.


4.5 Financial incentive scheme


Since the quantity of construction output achieved by an individual production worker or
crew is measurable, the hygiene motivators can be transformed into financial incentives
and used to specifically try and encourage improvements in:
ProductivityMethods of workingOperatives earnings, but without increasing unit costs.


Factors affecting construction workers‟ motivation


Major motivating and ―hygiene‖ factors are listed below:
Obviously, the specific employer needs to provide a total package embracing at least the
most important worker motivators and avoid those elements likely to irritate the
workforce and cause dissatisfaction.
Incentive schemesAn incentive is something to pay in return for motivating/encouraging workers to work
more and increase production. Many schemes are available to suit different situations;
those most applicable to the construction industry are outlined below:
Profit sharing – The Company pays out either yearly or half yearly a lump sum or
shares to its employees, based on the profit earned by the company. This system operates
best where labour turnover is low and the workforce can meaningfully contribute to the
strategies for profit success.
Job dissatisfaction factors:Poor treatment by supervisorsLack of recognition of good
effort
Reducing work opportunitiesIncompetent crew colleaguesPoor communication with
management
Under utilisation of skillsLack of participation in
decision making
Unsafe working conditionsJob satisfaction factors:Fair level of payIncentive corresponds to financial rewardPay received on timeGood facilities on siteSafe and healthy working conditionsGood working relations with supervisorsFavourable promotion laddersJob securityGood working relations with other crew
members
Recognition for doing a good job, etc


Day work – An hourly rate is paid related to the skill required by the task; the worker is
then simply paid for attendance at work. The system is most suitable for craft operations
where either there is great complexity involved or a high level of skill is required. High
rates of pay coupled with semi financial incentives are often necessary to attract and keep
the worker.
Piece work – straight piece work is the payment of a uniform price per unit of
production. The principle is that as a worker improves output, earnings increase
proportionately.
Such a system would be best installed on repetitive – type activities where the standard
time for doing the work can be reasonably, accurately determined. Hence it is more
popular in the manufacturing industries but has gained favour for some of the
construction finishing trades such as flooring, plastering, electrical wiring etc.
Standard time, or hour, system – Essentially, this is the same as straight piece work
system, but the targets for the worker are expressed in time units rather than money.
Example: A worker is given a target of eight hours to complete an activity and completes
it in six hours. Thus payment = 8 x hourly rate. The next unit can now be commenced
two hours earlier and thereby the workers‘ overall earnings are proportionately increased.
The advantage of the system is that if new hourly rates are negotiated the time standards
remain unchanged.
Hour saved systemPlus rate or spot bonus – A minimum bonus, sometimes called a fall – back bonus is paid
whatever the output, the incentive simply being used to generate a competitive
remuneration rates when the basic rate is low e.g. where local employment practices may
be restrictive.


Job and finish


The worker is offered a lump sum of money to complete an operation, useful on for
example large concrete pours or similar work, when the gang will complete the work as
quickly as possible, but be paid for the full day‘s work and any bonus earned.
Group schemeMany construction activities on site performed by gangs require the different classes of
skilled workers to be acknowledged in earning levels. The solution normally preferred
involves apportioning the bonus on a shares basis, usually with the gang supervisor being
paid slightly more than trades members and so on through the skills.
4.6 Behaviour Modification TechniquesThe methods of which the behaviour of workers in any industry can be modified to attain
good industrial relations and increased output are known as behaviour of workers in any
working environment.
Welfare facilities – canteen, restroom, fair price shop, laundry, facilities for
education of children, transport, etc will motivate the workers to work more
which will result in increased production.
Incentive (financial and non financial)MotivationsBetter environments – no quarrels.Removal of frustration: There should be no cause for frustration. Workers
must be satisfied with their jobs and should be given equal remuneration for
equal work.
Participation: Workers should be made to feel responsible for the work they
are doing. They should have a feeling that they have a say in the management
and if something goes wrong, they shall equally be losers and this makes them
more responsible and they will work whole heartedly.


With these activities workers may be made to feel that they are an integrate part of the
industry and any gain or loss in the industry is equally their gain/loss. If is the above
techniques are applied properly, they shall prove a good tool to modify the behaviour of
workers.


4.7 Grievances and their Causes


Grievances in workers develop when they feel that injustice has been done to them or
they are not treated properly. Generally grievances develop due to feelings of
dissatisfaction in the workers towards the policies of the management. An aggrieved
worker will not work properly and will develop ill will towards management. Such a
situation is undesirable and as such should be handled at the earliest before causing
strike/unrest in the industry.


Causes of grievances


Some of the causes of grievances of employees are:
1. Discrimination – in pay, gratuity, leave, welfare facilities, working hours etc.
2. Undue favouritism – if favouritism is shown either by management or other
officers of the management in the methods of promotions or in the distribution
of work to the workers, will cause grievances.
3. In human behaviour – inadequate level of supervision, flow of materials and
instructions not on time.
4. Lack of incentives – low earnings (remuneration)
5. Strict rules
6. Victimisation of supervisors
7. Personality clashes between an individual and gang/group.
Handling grievancesThe following steps are recommended in handling grievances#:
(a) Listen to the aggrieved person's problem
(b) Listen to the other person's side of the story

(c) Collect any other facts from witnessed if necessary
(d) Study the facts and information
(e) Seek, if necessary, assistance from other supervisors.
(f) Make a decision (fairly and mobilised)
(g) State the decision and act on it
Any problems/grievance outside the powers of the supervisor like wages, scales,
promotions, etc should be reported immediately to the personnel officer at the office.
4.8 Principles of a good incentive schemeThe following guidelines may assist in achieving success in incentive schemes
implementation:
- Bonus should be paid to workers in direct proportion to the effort applied
- The earnings of the worker should not be limited in any way

- The set targets should be attainable and there after remain unaltered.
- Unavoidable hold ups should be excluded from bonus paid hours and paid at

basic rate.
- The scheme must be easily understandable to the worker so that the bonus
calculation can be easily determined.
- Bonus schemes can lead to substandard work and therefore penalties should be
included and enforced. This requires a tough minded attitude from management
as there will be opposition from the work force.
- The scheme should comply with local union arrangement.
- The scheme should be integrated with a cost control system.
Example: The site manager responsible for the construction of a large concrete pump
house sets a crew of five workers, a target of 50 man- hours to erect the form work for the
concrete in the base pour. Calculate the bonus earned by each crew member, given that
the work is completed in the times shown below:


Worker description Shares entitled per
hour worked
Actual time ( hours)
worked on activity
Shares
Gang supervisor
Carpenter No.1
Carpenter No.2
Labourer No.1
Labourer No.2
1.5
1.25
1.25
1 1
8 8 8 8 43612
10
10
8 4
44

Solution:
Basic rate of payment is 500/= per hour
Hours saved 50 – 36 = 14 hours
Bonus 14 x 500 = 7,000/=

Bonus per share 7,000 = 159 per share.
44
Earnings of each crew member:Gang supervisor 159 x 8 x 1.5 = 1908
Carpenter No.1 159 x 8 x 1.25 = 1590
Carpenter No.1 159 x 8 x 1.25 = 1590
Labourer No.1 159 x 8 x 1 = 1272
Labourer No. 2 159 x 4 x 1 = 636
6996