Motivation

Motivation is the internal and external factors that stimulate a person's desire to do something or achieve a goal. Internal factors include pride in doing a good job; external factors include how a manager treats employees. Businesses want employees to put in effort because they want to, not just because they are paid to turn up.

Financial and non-financial methods

Financial methods reward employees with money or money-related benefits, such as pay, bonuses or fringe benefits. Promotion and fringe benefits are financial because they have a monetary value or lead to higher pay. Non-financial methods motivate through the nature of the work itself, such as giving employees more variety, challenge or control over how they complete tasks.

Choosing the right mix

Non-financial methods often cost less than financial rewards and can last longer, because they change the everyday experience of work. But financial methods may be essential where pay is low or seen as unfair: if staff believe they are underpaid compared with similar local jobs, extra responsibility may feel like more work for the same money.

A small indoor climbing centre could pay its weekend instructors a higher hourly rate and ask one instructor to design the routes on a new wall. The extra pay deals with fairness; designing the routes adds interest and responsibility. Using both can work better than relying on either alone.

The most effective method depends on the type of job, the employees' needs and the business's budget. A call-centre role handling the same enquiries all day may need financial incentives alongside varied tasks, while a role designing new products may benefit more from freedom over how work is done. A combination of financial and non-financial methods is often used.

Motivation affects how employees feel about their work, and a motivated workforce creates a number of clear benefits for a business. These gains include keeping staff, attracting applicants, raising productivity and increasing profit.

Keeping staff and saving costs

Motivated employees are more likely to stay with the business, so staff turnover — the proportion of employees who leave and are replaced each year — falls. Every leaver can mean money spent on advertising the job, interviewing candidates and training a replacement. Avoiding those costs protects the business's finances. For example, a furniture workshop with 20 employees might usually lose four workers a year. If better motivation reduces this to one leaver, the owner avoids three recruitment rounds and three training programmes.

Attracting able applicants

A business with a reputation for happy, well-motivated staff attracts more people when a vacancy is advertised. A larger pool of applicants gives the business a wider choice of candidates and a better chance of appointing able employees. Those employees may then work more effectively and need less supervision.

Working harder and raising output

Motivated employees generally work harder and more effectively, which raises productivity — output per worker. If the furniture workshop's staff build 120 benches a week instead of 100, without extra wages, its costs are spread over more output and unit costs fall. The business can increase output without taking on extra staff.

Together, lower staff turnover and higher productivity increase profits and help the business to compete more effectively.

Remuneration is the financial payment you receive for the work you do. It is a financial method of motivation, and two common forms are salary and wage.

Salary

A salary is a fixed annual amount, usually paid in equal monthly amounts. For example, a salary of £27,000 a year is £2,250 a month, whatever the number of working days.

It gives the employee a predictable income, making budgeting easier, and the business finds pay costs easy to plan and budget. However, the employee gets no extra pay for overtime or extra effort, and the business pays the same even when output is low.

Wage

A wage is normally paid weekly and varies with hours worked or output. For example, £11 an hour for 30 hours is £330; 35 hours is £385.

The employee is paid for extra hours worked, so overtime is rewarded. The business pays only for time worked, which suits flexible or seasonal demand: an ice cream seller can pay for more hours in a hot week. But the employee's income can be uncertain, and overtime rates can raise business costs sharply when busy.

Comparing salary and wage

A bonus and commission are financial methods of motivating employees by linking part of their pay to performance.

Bonus

A bonus is extra money paid to a worker or a team on top of their usual wage, normally as a reward for hitting a target such as a sales figure or an output level. It motivates because the reward is directly linked to results: hit the target and you gain extra money. For example, a warehouse team that packs 5,000 orders in a month with fewer than ten errors might each receive a £50 bonus. The risk is that a badly designed target can push employees to cut corners or act unethically, such as rushing orders and skipping quality checks. Targets that are too high can also demotivate staff who feel the bonus is impossible to earn.

Commission

Commission is a payment to an employee of a percentage of the value of the products or services they sell. It is common in sales jobs, which often have a low basic wage. For example, a phone shop assistant on £1,000 basic pay per month plus 5% commission who sells £8,000 of phones earns £400 commission, making £1,400 in total. Commission encourages employees to sell more because their pay rises with sales. However, it gives an uncertain income, so a quiet month means lower pay. It can also lead to overly pushy selling or sales that are not in the customer's interest, such as persuading someone to buy a contract they do not need.

Fringe benefits are rewards an employer gives in kind rather than as money. Examples include a mobile phone the employee can use privately, private medical insurance, meals that the employer helps to pay for, and a gym membership paid for by the employer. They count as a financial method of motivation, even though employees are not handed money, because each benefit has a cash value and increases the total value of the pay package.

Why businesses offer them

A small plumbing firm cannot match the wages of a large rival, so it gives each engineer a mobile phone for private use and pays for a gym membership. That package persuades experienced plumbers to join and to stay.

Drawbacks

Fringe benefits are costly to provide. Phones must be bought, insured and replaced, and gym memberships must be renewed each year. They also take time to administer, because someone must arrange each scheme, keep records and sort out problems. Employees may take benefits for granted once they have had them for a while. They may also undervalue one they never use, such as a gym membership for someone who never goes to the gym, so the motivational effect can fade.

Job rotation is a non-financial method of motivation where staff regularly swap roles on a planned basis, so no one stays on the same duties for long. For example, at a garden centre, an employee might spend one week on the checkout, the next in the plant area and the following week in the stockroom.

How it motivates

Rotation adds variety to the working day, which reduces the boredom of repeating the same task. It also helps workers build new skills, so they feel more capable and useful. A checkout assistant who learns how to care for plants and handle deliveries has more interesting work and a wider set of abilities.

Benefit to the business

Rotation creates a more flexible workforce. If one employee is absent, someone who has already rotated into that role can cover, so production or customer service can continue. This reduces disruption and means the business depends less on one person always being available.

Drawbacks

Job rotation can be costly because each employee must be trained for several roles instead of one. Productivity may also fall while workers learn a new task and are not yet fast or confident. For instance, a new stockroom worker may take longer to find items, slowing down shelf replenishment at first. Job rotation is not the same as job enrichment: it varies tasks at a similar level rather than adding extra challenge and responsibility.

Job enrichment is a non-financial method of motivation. It means giving an employee greater challenge and responsibility in the work they already do, so that the job itself becomes more satisfying. The job does not simply change to a different set of tasks: the tasks become more demanding and the employee is trusted with decisions that a manager or supervisor would otherwise make. Although the motivation comes from the work itself, enrichment may be accompanied by higher pay to reflect the extra responsibility.

It motivates because the work becomes more interesting and gives the employee a sense of achievement. A receptionist at a small hotel who is put in charge of planning the staff rota and dealing with complaints from guests has a job with more variety and more to feel proud of than someone who only answers the phone and hands over keys.

Drawbacks for the business

• Training is needed, so the employee can cope with the extra duties and decisions, which costs money and time.
• Staff are away from producing output while they are trained or take on planning and checking work, so output can fall in the short term.
• Not every employee wants extra responsibility. Some are happy with familiar work and may feel stressed or resentful if more is pushed onto them, so enrichment can demotivate as well as motivate.

Enrichment compared with job rotation

So a supermarket worker whose job is enriched might become responsible for ordering stock and training new starters, while a worker whose job is rotated simply moves from the till to the shelves and back again.

Autonomy is the freedom an employee has to decide how to do their work. A manager may set the goal, deadline and budget, but the employee chooses the method, the order of tasks or the approach. For example, a mechanic at a bike repair workshop might be told to fix a customer's gears by Friday, then decide which tools to use, which parts to replace and how to test the repair.

Autonomy is a non-financial method of motivation because the reward comes from the work itself rather than extra money. It can motivate employees by making them feel trusted and valued: being allowed to make real choices shows the business has confidence in them. That can raise job satisfaction and make staff more willing to stay.

Benefits for the business

Employees who know their job well can often make decisions faster than a manager who has to approve every small choice. Autonomy also makes better use of their knowledge, because the person closest to the work may spot the best solution. In the bike workshop, an experienced mechanic may choose a quicker, cheaper repair than a fixed procedure would allow.

Risks and limits

Autonomy can go wrong if employees lack the skills or information to decide well. Decisions may be poor or inconsistent between staff, which can harm quality and customer service. A new mechanic without enough training might fit the wrong part. The business therefore needs training and clear limits, such as a spending cap or safety rules. Autonomy does not mean there is no manager and no rules; it means employees have choices inside agreed boundaries.