Motivating, Satisfying, and Leading Employees
Psychological contracts in the workplace are the set of expectations held by
employees concerning what they will contribute to an organization and what the
organization will in return provide to them. Psychological contracts have changed
significantly in the last decade. Employers offer less security but more benefits,
while employees offer less loyalty but are often willing to work longer hours and
assume more responsibility.
Good human relations – positive interactions between employers and employees –
lead to high levels of job satisfaction and morale. As a result, employees are
more productive and more loyal, with a lower level of grievances, absenteeism,
Theories of employee motivation have changed dramatically over the years. The
most important models are summarized below:
Classical Theory: People are motivated solely by money. This theory
impacted business via scientific management, which focused on analyzing
jobs and finding more efficient ways to perform tasks.
Behavior Theory: People’s needs play a role in motivation. Employees
perform better when they believe that management is paying attention to
them. This theory was first demonstrated in the Hawthorne Studies.
Human Resources Model: There are two kinds of managers – Theory X
managers who believe that people are inherently uncooperative and must
be constantly punished or rewarded, and Theory Y managers who believe
that people are naturally responsible and self-motivated to be productive.
Maslow’s Hierarchy of Needs Model: People have different needs which
they attempt to satisfy in their work. Lower level needs must be satisfied
before people seek to meet higher level needs.
Two-Factor Theory: If basic hygiene needs are not met, workers will be
dissatisfied. Only by increasing more complex motivation factors can
companies increase employee performance.
Expectancy Theory: People will work hard if they believe that their
efforts will lead to desired rewards.
Equity Theory: Motivation depends on the way employees evaluate their
treatment by an organization, relative to its treatment of other workers.
Managers can use several strategies to improve employee satisfaction and
motivation. The principle of reinforcement or behavior modification theory
proposes that rewards and punishments can control behavior. Management by
objectives, participative management, and empowerment can improve human
relations by increasing the level of employee commitment and involvement in the
organizational team. Job enrichment, job redesign, and modified work schedules
can build job satisfaction by adding motivation factors to jobs in which they are
Effective managerial leadership is a key contributor to employee satisfaction and
motivation. Autocratic managers typically issue orders that they expect
employees to obey. Democratic managers generally seek subordinates’ input into
decisions. Free-rein managers more often advise than make actual decisions.
The contingency approach to leadership suggests that managers should assess
each situation individually and exercise a leadership style based on the elements
of the situation.
1. Describe the nature and importance of psychological contracts in the
2. Discuss the importance of job satisfaction and employee morale and
summarize their roles in human relations in the workplace.
3. Identify and summarize the most important theories of employee
4. Describe some of the strategies used by organizations to improve job
satisfaction and employee motivation.
5. Discuss different managerial styles of leadership and their impact on
human relations in the workplace.
Opening Case: Bringing the Bounty Back to P & G
I. Psychological Contracts in Organizations
II. The Importance of Satisfaction and Morale
A. Recent Trends in Managing Satisfaction and Morale
III. Motivation in the Workplace
A. Classical Theory
B. Behavior Theory: The Hawthorne Studies
C. Contemporary Motivational Theories
1. Human Resources Model: Theories X & Y
2. Maslow’s Hierarchy of Needs Model
3. Two-Factor Theory
4. Expectancy Theory
5. Equity Theory
IV. Strategies for Enhancing Job Satisfaction and Morale
A. Reinforcement / Behavior Modification Theory
B. Management by Objectives (MBO)
C. Participative Management and Empowerment
D. Team Management
E. Job Enrichment and Job Redesign
1. Job Enrichment Programs
2. Job Redesign Programs
a. Combining Tasks
b. Forming Natural Work Groups
c. Establishing Client Relationships
F. Modified Work Schedules
1. Work-Share Programs
2. Flextime Programs and Alternative Workplace Strategies
3. Telecommuting and Virtual Offices
4. Advantages and Disadvantages
V. Managerial Styles and Leadership
A. Managerial Styles
B. The Contingency Approach of Leadership
C. Motivation and Leadership in the Twenty-First Century—
Changing Patterns of Motivation
I. Psychological Contracts in Organizations (Use PowerPoint 9.3.)
A psychological contract is the set of expectations held by employees
concerning what they will contribute to an organization and what the
organization will provide the employees in return.
II. The Importance of Satisfaction and Morale (Use PowerPoint 9.4.)
Levels of job satisfaction and morale among employees depend
largely upon employees’ motivation levels and the leadership
exhibited by management.
A. Recent Trends in Managing Satisfaction and Morale (Use
Worker layoffs and downsizing programs implemented by
companies in the last decade have created low morale among many
workers. Firms have responded by announcing and implementing
solid plans for future growth in an attempt to rebuild employee
III. Motivation in the Workplace (Use PowerPoint 9.6.)
Theories that address employee motivation are divided into three
categories: classical theory, behavior theory, and many contemporary
A. Classical Theory
According to the classical theory, employees are motivated solely
by money. Fred Taylor, the father of scientific management,
proposed that paying workers more money would prompt them to
B. Behavior Theory: The Hawthorne Studies
A group of Harvard researchers studied the relationship between
changes in the physical work environment and worker output. The
result, known as the Hawthorne effect, surprisingly revealed that
productivity rose to almost any management action. The study
concluded that employees responded with increased output
because the management action or changes in the physical work
environment were interpreted as special attention.
C. Contemporary Motivational Theories (Use PowerPoint 9.7,
9.8, 9.9, 9.10, 9.11.)
1. Human Resources Model: Theories X and Y.
McGregor’s Theory X is the managerial assumption that
workers are lazy and need direction; Theory Y is the
managerial assumption that workers are energetic,
cooperative, and self-motivated.
2. Maslow’s Hierarchy of Needs Model. Maslow
proposed that workers each have a set of needs that they
seek to fulfill in their jobs and that these needs are
arranged in a hierarchy of importance. Those needs are
physiological, safety, social, self-esteem, and self-
actualization. Maslow further proposed that lower-level
needs must be met before higher-level needs and that
once one set of needs is met, it ceases to motivate
3. Two-Factor Theory. Frederick Herzberg proposed that
job satisfaction depends on motivating factors, such as
recognition in the workplace, as well as the presence of
hygiene factors, such as work conditions. Hygiene
factors do not enhance satisfaction, but they do prevent
dissatisfaction. Research suggests that the theory works
only in some situations.
4. Expectancy Theory. This theory states that employees
are especially motivated to work toward rewards when
they have a greater probability of success in achieving
them. This theory explains why people may not work as
hard when their salaries are based solely on seniority, for
5. Equity Theory. This theory focuses on employees’
perceptions of fairness and unfairness in the workplace.
Many people evaluate their treatment relations to an
employee’s treatment of others.
IV. Strategies for Enhancing Job Satisfaction and Motivation (Use
A. Reinforcement / Behavior Modification Theory (Use
Many managers try to control employees’ behaviors through
rewards, including praise, pay, promotion, and job security, as
well as through punishments, such as suspensions and reductions
B. Management by Objectives (MBO) (Use PowerPoint 9.14.)
MBO is a system of collaborative goal setting, extending through
all levels of an organization. MBO is primarily concerned with the
implementation of plans in organizations.
C. Participative Management and Empowerment (Use
In participative management and empowerment, employee
suggestions and opinions are welcomed. Employees may feel
more committed to the firm’s goals if they have helped to shape
D. Team Management
Participative programs may not be for everyone. The key may be
to invite participation only to the extent that employees want to
have input and only if participation will have real value for the
E. Job Enrichment and Job Redesign (Use PowerPoint 9.16.)
Both of these programs typically increase worker satisfaction in
jobs that lack motivating factors.
1. Job Enrichment Programs. These programs attempt to
add motivating factors to job activities.
2. Job Redesign Programs. These programs attempt to
create a better fit between employees and their jobs by
restructuring work. Job redesign can usually be carried
out through combining tasks, forming natural work
groups, and/or establishing client relationships.
a. Combining Tasks. Enlarging jobs and increasing
their variety can make employees feel that their
work is more meaningful.
b. Forming Natural Work Groups. People who
perform different jobs on the same projects are
candidates for natural work groups that help
employees see the place and importance of their
jobs in the total structure of the firm.
c. Establishing Client Relationships. Allowing
employees to interact with customers can increase
F. Modified Work Schedules (Use PowerPoint 9.17, 9.18, 9.19.)
1. Work-Share Programs. These programs allow
employees to share a single, full-time job. Employees
appreciate the schedule flexibility to accommodate their
personal needs and firms can reduce turnover and save on
the cost of benefits.
2. Flextime Programs and Alternative Workplace
Strategies. These programs allow workers to choose
their working hours by adjusting a standard work
3. Telecommuting and Virtual Offices. Telecommuting,
a new form of flextime, allows employees to perform
some or all of their jobs away from standard office
settings; virtual offices are redesigned conventional
office space made to accommodate jobs and schedules
that do not depend much on assigned spaces.
4. Advantages and Disadvantages. Some advantages
include: (a) more freedom in employees’ personal lives;
(b) ability of employees to coordinate work around
family members’ schedules; (c) an increased sense of
freedom for employees; and (d) higher commitment and
satisfaction for employees. Some disadvantages include:
(a) the inability of employees to meet deadlines; (b)
coordinating work schedule with family members’
schedules; and, (c) employer perceptions that unobserved
workers are not actually working.
V. Managerial Styles and Leadership (Use PowerPoint 9.20.)
Leadership is the process of motivating others to work to meet
specific organizational or personal objectives.
A. Managerial Styles (Use PowerPoint 9.21.)
Managerial styles are patterns of behavior that a manager exhibits
in dealing with subordinates. An autocratic style is one in which
managers expect orders to be obeyed without question. While
retaining final decision-making power, managers who adopt a
democratic style welcome input from subordinates. A free-rein
style allows subordinates to make their own decisions with a very
basic set of guidelines. Most managers typically do not exhibit any
one particular style of leadership.
B. The Contingency Approach to Leadership
Managerial responses are usually situational. With the
contingency approach, a manager’s behavior is dependent on the
specific elements unique to each situation. This approach
recommends that human relations skills are critical and that people
from differing cultures behave differently, expecting different
things from their managers.
C. Motivation and Leadership in the Twenty-First Century (Use
The diversity in the contemporary workforce makes motivating
behavior more complex for managers; today’s leaders are also
finding it necessary to change their own behavior. Leadership is
becoming more democratic throughout organizations as employees
become more empowered.
1. Changing Patterns of Motivation. There is now a trend
toward job security, not money, as a motivator.
Additionally, contemporary motivators are flexible work
hours, casual dress, telecommuting, nap time, massages,
day care, and the opportunity to bring a pet to work.
Answers to Questions and Exercises
Questions for Review
1. Describe the psychological contract you currently have or have had in
the past with an employer. If you have never worked, describe the
psychological contact that you have with the instructor in this class.
Answers will vary, but should all revolve around the concept of
contributions and inducements.
2. Do you think that most people are relatively satisfied or dissatisfied
with their work? Why are they mainly satisfied or dissatisfied?
Answers will vary.
3. Compare and contrast Maslow’s hierarchy of needs with the two-
factor theory of motivation.
The two are somewhat similar in that they both depict hierarchical needs,
however Maslow describes five basic needs, while Herzberg describes two
categories of needs. In both cases, lower-level needs must be satisfied
first. However, in Maslow’s model, when needs are met they cease to be
motivating, while in Herzberg’s model hygiene factors only affect
motivation in that they are absent or fail to meet expectations.
4. How can participative management programs enhance employee
satisfaction and motivation?
Participative management encourages employees to offer opinions and
suggestions on how they do their jobs and on how the firm is operated. As
a result of helping to shape the organization’s goals, employees are more
committed to achieving them. Furthermore, virtually all employees
appreciate knowing that managers will listen to their input.
Questions for Analysis
5. Some evidence suggests that recent college graduates show high levels
of job satisfaction. Levels then drop dramatically as they reach their
late twenties, only to increase gradually once they get older. What
might account for this pattern?
Early levels of satisfaction might stem from the excitement of landing a
first career job. As workers reach their late twenties, a range of factors
might account for the drop: perceived inequities among their co-workers
and between their co-workers and management, boredom with the daily
grind, a lack of anticipated advancement, financial pressure for family
obligations, etc. In later years, job satisfaction may increase as workers
either gain more responsibility and control of their work life or come to
terms with their jobs as they stand.
6. As a manager, under what sort of circumstances might you apply each
of the theories of motivation discussed in this chapter? Which would
be easiest to use? Which would be hardest? Why?
Answers will vary. Students may note that classical theory would be easy
to apply, but too simplistic to be effective. Two-factor theory, expectancy
theory, and equity theory allow for more complexity, and include clear,
applicable motivating factors. Behavior theory, the human resources
model, and Maslow’s hierarchy may be the most difficult to apply since
they are somewhat vague and limited in terms of specific applications.
7. Suppose you realize one day that you are dissatisfied with your job.
Short of quitting, what might you do to improve your situation?
Answers will vary, although analyzing the source of dissatisfaction should
clearly be the first step, followed by at least discussing the causes with
8. List five U.S. managers who you think would also qualify as great
Answers will vary.
9. At the library or using the Internet, research the manager or owner of
a company in the early 20th century and the manager or owner of a
company in the 1990s. Compare and contrast the two in terms of
their times, leadership styles, and views of employee motivation.
Students’ answers will vary.
10. Interview the manager of a local manufacturing company. Identify as
many different strategies for enhancing job satisfaction at that
company as you can.
Answers will vary, but should include discussions of the strategies
reviewed in the chapter.
Answers to Exercising Your Ethics
1. What are the ethical issues in this case?
The new HR manager is deeply concerned that the behavior modification
approach demonstrates a lack of respect for employees.
2. What do you think most managers would do in this situation?
Answers will vary.
3. What would you do?
Answers will vary, but students will probably consider the possibility of
including elements of expectancy theory while implementing the behavior
Answers to Building Your Business Skills
1. What is your group’s most important recommendation? Why do you
think it is likely to succeed?
Answers will vary, but will most likely focus on revamping the
pay/incentive structure to reward those employees for performance,
thereby increasing accountability.
2. Changing the corporate culture to make it less paternalistic may
reduce employees’ sense of belonging to a family. If you were an
employee, would you consider a greater focus on profits to be an
improvement or a problem? How would it affect your motivation and
Answers will vary, but students should recognize that the new corporate
culture will be alienating for some and will only be effective for others if
the company generously shares rewards with employees.
3. What steps would you take to improve the attitude and productivity
of longtime employees who resist change?
Answers will vary, but students should consider that the change process
would likely be long term. It may be most effective to begin the process
with newer employees, working backward to longtime employees who
tend to be less flexible. Behavior modification and reinforcement may be
the most effective strategies.
1. This activity is based on data collected by students via a short survey. Ask
students to survey a small group of working individuals, finding out what
motivates those workers in the workplace. Surveys may simply be
designed in a way that allows respondents to merely fill in their top two
motivators in the workplace, for example; or, students can design the
survey to include numerous options from which the respondents will pick
any two. Once the data are collected, compare results in class. Is there a
trend in how the respondents answered? What were the top choices of the
2. According to Maslow, our needs are arranged in a hierarchy, with our
most basic needs being met first. According to the model, safety needs
may not take precedence over physiological needs as long as the
physiological needs are unmet. Working in groups of three or four,
students should come up with real-life and/or hypothetical examples of
physiological needs that definitely take precedence over safety needs,
safety needs that take precedence over social needs, etc.