Answer & Explanation:Discuss the various theories on motivation using the Ramhall article attached

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A Review of Employee Motivation Theories and their Implications
for Employee Retention within Organizations
Sunil Ramlall, Ph.D., University of St. Thomas, Minneapolis, MN
The article provides a synthesis of employee motivation theories and offers an explanation of how
employee motivation affects employee retention and other behaviors within organizations. In addition to explaining
why it is important to retain critical employees, the author described the relevant motivation theories and explained
the implications of employee motivation theories on developing and implementing employee retention practices.
The final segment of the paper provides an illustration with explanation on how effective employee retention
practices can be explained through motivation theories and how these efforts serve as a strategy to increasing
organizational performance.
In today’s highly competitive labor market, there is extensive evidence that organizations regardless of
size, technological advances, market focus and other factors are facing retention challenges. Prior to the September
11 terrorist attacks, a report by the Bureau of National Affairs (1998) showed that turnover rates were soaring to
their highest levels over the last decade at 1.3 % per month. There are indeed many employee retention practices
within organizations, but they are seldom developed from sound theories. Swanson (2001) emphasized that theory
is required to be both scholarly in itself and validated in practice, and can be the basis of significant advances.
Given the large investments in employee retention efforts within organizations, it is rational to identify,
analyze and critique the motivation theories underlying employee retention in organizations. Low unemployment
levels can force many organizations to re-examine employee retention strategies as part of their efforts to maintain
and increase their competitiveness but rarely develop these strategies from existing theories. The author therefore
described the importance of retaining critical employees and explained how employee retention practices can be
more effective by identifying, analyzing, and critiquing employee motivation theories and showing the relationship
between employee motivation and employee retention. Furthermore, Hale (1998) stated that 86% of employers
were experiencing difficulty attracting new employees and 58% of organizations claim that they are experiencing
difficulty retaining their employees. Even when unemployment is high, organizations are particularly concerned
about retaining their best employees.
The article provides a synthesis of employee motivation theories and offers an explanation of how
employee motivation affects employee retention within organizations. In addition to explaining why it is important
to retain critical employees, the author described the relevant motivation theories and explained the implications of
employee motivation theories on developing and implementing employee retention practices. The final segment of
the paper provides an illustration with explanation on how effective employee retention practices can be explained
through motivation theories and how these strategies serve as a strategy to increasing organizational performance.
In today’s business environment, the future belongs to those managers who can best manage change. To manage
change, organizations must have employees committed to the demand of rapid change and as such committed
employees are the source of competitive advantage (Dessler, 1993). “Commitment is critical to organizational
performance, but it is not a panacea. In achieving important organizational ends, there are other ingredients that
need to be added to the mix. When blended in the right complements, motivation is the result” (O’Malley, 2000,
Why is it Necessary to Retain Critical Employees?
Fitz-enz (1997) stated that the average company loses approximately $1 million with every 10 managerial
and professional employees who leave the organization. Combined with direct and indirect costs, the total cost of an
exempt employee turnover is a minimum of one year’s pay and benefits, or a maximum of two years’ pay and
benefits. There is significant economic impact with an organization losing any of its critical employees, especially
given the knowledge that is lost with the employee’s departure. This is the knowledge that is used to meet the needs
The Journal of American Academy of Business, Cambridge * September 2004
and expectations of the customers. Knowledge management is the process of creating, capturing, and using
knowledge to enhance organizational performance (Bassi, 1997).
Furthermore, Toracco (2000) stated that although knowledge is now recognized as one of an organization’s
most valuable assets most organizations lack the supportive systems required to retain and leverage the value of
knowledge. Organizations cannot afford to take a passive stance toward knowledge management in the hopes that
people are acquiring and using knowledge, and that sources of knowledge are known and accessed throughout the
organization. Instead, organizations seeking to sustain competitive advantage have moved quickly to develop
systems to leverage the value of knowledge for this purpose (Robinson & Stern, 1997; Stewart, 1997). Thus, it is
easy to see the dramatic effect of losing employees who have valuable knowledge.
The concept of human capital and knowledge management is that people possess skills, experience and
knowledge, and therefore have economic value to organizations. These skills, knowledge and experience represent
capital because they enhance productivity (Snell and Dean, 1992). Human capital theory postulates that some labor
is more productive than other labor simply because more resources have been invested into the training of that labor,
in the same manner that a machine that has had more resources invested into it is apt to be more productive
(Mueller, 1982). One of the basic tenets of human capital theory is that, like any business investment, an
“investment in skill-building would be more profitable and more likely to be undertaken the longer the period over
which returns from the investment can accrue” (Mueller, 1982, p. 94). Again, employee retention is important in
realizing a full return on investment. Human capital theory includes the length of service in the organization as a
proxy for job relevant knowledge or ability. A person’s job relevant knowledge or ability influences that person’s
wage, promotional opportunity and/or type of job (Becker, 1975; Hulin & Smith, 1967; Katz, 1978). The
understanding of length of service in an organization relates back to Ulrich’s (1998) component of commitment in
his definition of intellectual capital. His definition was simply “competence multiplied by commitment” (p. 125),
meaning intellectual capital equals the knowledge, skills, and attributes of each individual within an organization
multiplied by their willingness to work hard. It will become significantly more important in the years ahead to
recognize the commitment of individuals to an organization, as well as the organization’s need to create an
environment in which one would be willing to stay (Harris, 2000). Organizations will need to either create an
intellectual capital environment where the transmission of knowledge takes place throughout the structure, or
continue to lose important individual knowledge that has been developed through the length of service. This deep
knowledge is what many believe will help to meet the needs and expectations of the customers and to create and
sustain a competitive advantage within the global economy in which organizations are competing in today.
The term motivation derived from the Latin word movere, meaning to move (Kretiner, 1998). Motivation
represents “those psychological process that cause the arousal, direction, and persistence of voluntary actions that
are goal oriented (Mitchell, 1982, p.81). Motivation as defined by Robbins (1993) is the “willingness to exert high
levels of effort toward organizational goals, conditioned by the effort’s ability to satisfy some individual need.” A
need in this context is an internal state that makes certain outcomes appear attractive. An unsatisfied need creates
tension that stimulates drives within the individual. These drives then generate a search behavior to find particular
goals that, if attained, will satisfy the need and lead to the reduction of tension (Robbins, 1993). The inference is
that motivated employees are in a state of tension and to relieve this tension, they exert effort. The greater the
tension, the higher the effort level as illustrated in Figure 1. Motivational theorists differ on where the energy is
derived and on the particular needs that a person is attempting to fulfill, but most would agree that motivation
requires a desire to act, an ability to act, and having an objective. – Insert Figure 1 about here – There are numerous
theories of motivation. The author identified the most relevant theories and explained the respective theories of
motivation and how motivation may impact employee commitment in an organization. Five methods of explaining
behavior – needs, reinforcement, cognition, job characteristics, and feelings/emotions – underlie the evolution of
modern theories of human motivation (Kretiner, 1998). In this motivational theory effort, the following motivation
theories were selected (1) need theories, (2) equity theory, (3) expectancy theory, and (4) job design model given
their emphasis and reported significance on employee retention.
Need Theories of Motivation
Need theories attempt to pinpoint internal factors that energize behavior. Needs as defined previously are
physiological or psychological deficiencies that arouse behavior. These needs can be strong or weak and are
influenced by environmental factors. Thus, human needs vary over time and place.
The Journal of American Academy of Business, Cambridge * September 2004
Maslow’s Need Hierarchy Theory
Maslow’s defining work was the development of the hierarchy of needs. According to Stephens (2000),
Maslow believed that human beings aspire to become self-actualizing and viewed human potential as a vastly
underestimated and unexplained territory as illustrated in Figure 2. Insert Figure 2 about here
Maslow believed that there are at least five sets of goals which can be referred to as basic needs and are
physiological, safety, love, esteem, and self-actualization. Maslow (1943) stated that people, including employees at
organizations, are motivated by the desire to achieve or maintain the various conditions upon which these basic
satisfactions rest and by certain more intellectual desires. Humans are a perpetually wanting group. Ordinarily the
satisfaction of these wants is not altogether mutually exclusive, but only tends to be. The average member of society
is most often partially satisfied and partially unsatisfied in all of one’s wants (Maslow, 1943). The implications of
this theory provided useful insights for managers and other organization leaders. One of the advise was for
managers to find ways of motivating employees by devising programs or practices aimed at satisfying emerging or
unmet needs. Another implication was for organizations to implement support programs and focus groups to help
employees deal with stress, especially during more challenging times and taking the time to understand the needs of
the respective employees (Kreitner, 1998). When the need hierarchy concept is applied to work organizations, the
implications for managerial actions become obvious. “Managers have the responsibility to create a proper climate in
which employees can develop to their fullest potential. Failure to provide such a climate would theoretically
increase employee frustration and could result in poorer performance, lower job satisfaction, and increased
withdrawal from the organization” (Steers & Porter, 1983, p.32). Champagne & McAfee in their book Motivating
Strategies for Performance and Productivity: A Guide to Human Resource Development listed some potential ways
of satisfying employee needs:
Vending machines
Drinking fountains
Wages and salaries
Fringe benefits
Retirement benefits
Medical benefits
Provide job descriptions
Give praise/awards
Avoid abrupt changes
Solve employee’s problems
Working conditions
Heating and ventilation
Rest periods
Encourage social interaction
Create team spirit
Facilitate outside social activities
Use periodic praise
Allow participation
Design challenging jobs
Use praise and awards
Delegate responsibilities
Give training
Encourage participation
Give training
Provide challenges
Encourage creativity
Some of these ideas may be easy and inexpensive to implement while others can be quite difficult and
costly. In addition, the level and type of need of employees may vary. Champagne and McAfee (1989), stated that
managers who use these strategies are generally viewed more favorably by managers and are thought to be more
considerate, supportive, and interested in their employees’ welfare.
McClelland’s Need Theory
Some people who have a compelling drive to succeed are striving for personal achievement rather than the
rewards of success per se. These people have the desire to do something better or more efficiently than it has been
done before (Robbins, 1993). McClelland’s in the publication The Achieving Society, published in 1961 described
The Journal of American Academy of Business, Cambridge * September 2004
the theory of needs focusing on three needs: achievement, power, and affiliation The need for achievement was
defined as the drive to excel, to achieve in relation to a set of standards, to strive to succeed. The need for power
was defined as the need to make others behave in a way that they would not have behaved otherwise. The need for
affiliation was defined as the desire for friendly and close interpersonal relationships. Achievement theories propose
that motivation and performance vary according to the strength of one’s need for achievement (Kreitner, 1998).
McClelland’s research supported an analogous relationship for societies as a whole revealing that a country’s level
of economic development was positively related to its overall achievement motivation (McClelland, 1961). The
need for achievement proposes that motivation and performance vary according to the strength of one’s need for
achievement and is defined as a desire to accomplish something difficult. Kreitner & Kinicki (1998) cite Murray
(1994) explaining the need for achievement as mastering, manipulating, or organizing physical objects, human
beings, or ideas. McClelland proposed that high achievers are more likely to be successful entrepreneurs. The need
for affiliation suggested that people have the desire to spend time in social relationships and activities. People with
a high need for affiliation prefer to spend more time maintaining social relationships, joining groups, and wanting to
be loved. Individuals high in this need are not the most effective managers or leaders because they have a hard time
making difficult decisions without worrying about being disliked (Kreitner, 1998). The need for power reflects an
individual’s desire to influence, coach, teach, or encourage others to achieve. Because effective managers must
positively influence others, McClelland proposes that top managers should have a high need for power coupled with
a low need for affiliation (Kreitner, 1998).
Equity Theory
Equity theory recognizes that individuals are concerned not only with the absolute amount of rewards they
receive for their efforts, but also with the relationship of this amount to what others receive. Based on one’s inputs,
such as effort, experience, education, and competence, one can compare outcomes such as salary levels, increases,
recognition and other factors. When people perceive an imbalance in their outcome-input ratio relative to others,
tension is created. This tension provides the basis for motivation, as people strive for what they perceive as equity
and fairness (Robbins, 1993). One of the prominent theories with respect to equity theory was developed through
the work of J.S. Adams. Adams’ theory is perhaps the most rigorously developed statement of how individuals
evaluate social exchange relationships (Steers, 1983). The major components of exchange relationships in this
theory are inputs and outcomes. In a situation where a person exchanges her or his services for pay, inputs may
include previous work experience, education, effort on the job, and training. Outcomes are those factors that result
from the exchange. The most important outcome is likely to be pay with outcomes such as supervisory treatment,
job assignments, fringe benefits, and status symbols taken into consideration also. Equity theory rests upon three
main assumptions (Carrell, 1978). First, the theory holds that people develop beliefs about what constitutes a fair
and equitable return for their contributions to their jobs. Second, the theory assumes that people tend to compare
what they perceive to be the exchange they have with their employers. The other assumption is that when people
believe that their own treatment is not equitable, relative to the exchange they perceive others to be making, they
will be motivated to take actions they deem appropriate. This concept of equity is most often interpreted in work
organizations as a positive association between an employee’s effort or performance on the job and the pay she or he
receives. Adams (1965) suggested that individual expectations about equity or “fair” correlation between inputs and
outputs are learned during the process of socialization and through the comparison with inputs and outcomes of
others. To further establish the causes of perceived and actual inequity in organizations, Pinder (1984) stated that
feelings of inequitable treatment tend to occur when “people believe they are not receiving fair returns for their
efforts and other contributions.” The challenge therefore for organizations is to develop reward systems that are
perceived to be fair and equitable and distributing the reward in accordance with employee beliefs about their own
value to the organization.
The consequences of employees perceiving they are not being treated fairly create a variety of options for the
employees (Champagne, 1989). These options include the employees reducing their input through directly restricting their work
output, attempting to increase their output by seeking salary increases or seeking a more enjoyable assignment. Other
possibilities are to decrease the outcomes of a comparison other until the ratio of that person’s outcomes to inputs is relatively
equal or increasing the other’s inputs. In addition to the above mentioned, the employee could simply withdraw from the
situation entirely, that is, quit the job and seek employment elsewhere.
Expectancy Theory
“Expectancy theory holds that people are motivated to behave in ways that produce desired combinations
of expected outcomes” (Kreitner & Kinicki, 1999, p.227). This paper provides a description of two of the
established researchers on the subject of expectancy theory.
The Journal of American Academy of Business, Cambridge * September 2004
Vroom’s Original Theory
Essentially, the expectancy theory argues that the strength of a tendency to act in a certain way depends on
the strength of an expectation that the act will be followed by a given outcome and on the attractiveness of that
outcome to the indivi …
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