Business Revision Guide: 3.5

• financial methods of motivation:

  • bonus
  • profit sharing
  • increase salary
  • increase wage
  • fringe benefits
• bonus: lump sum of money for reaching a target

  advantage: only get it if target reached, increase production or sale

  disadvantage: target may be too high, lump sum may be small
• profit sharing: % of profit paid to employees

  advantage: workers feel part of a team, will aim to be efficient so the business make more profit

  disadvantage: if the business doesn't make any profit then employees get no reward, depends on the percentage of profit they decide to share
• increase salary: lump sum split between 12 months (increased)

  advantage: workers get more pay which is guaranteed, keeps highly skilled staff within the business

  disadvantage: workers may not become more productive or efficient, depends how much the increase is by
• increase wage: workers are paid more per hour

  advantage: workers get more pay per hour and will want to work more hours

  disadvantage: workers may not become more productive or efficient, motivation depends on how much the increase is
• fringe benefits: workers are given additional benefits such as company car, gym membership

  advantage: benefits a worker may not be able to afford themselves, attractive to potential employees, leads to worker loyalty

  disadvantage: some employees may not appreciate the benefit, may be very expensive for the business
• labour turnover

  a measure of the number or proportion of staff who leave an organisation each year and who therefore need to be replaced
• motivation


  encouragement given to workers to work well
• retention


  when workers choose to stay employed in a business rather than leaving to work elsewhere
• non - financial methods of motivation

  • working environment
  • job rotation
  • award scheme
  • job enrichment
  • job enlargement
• working environment: better facilities such as staff room, drinks machines, canteen

  advantage: workers enjoy coming to work, they feel the business values them enough to have nice facilities

  disadvantage: it's not financial and employees may not benefit / enjoy
• job rotation: workers move around different work stations in the business

  advantage: workers get variety and to learn new skills, workers get to try different tasks

  disadvantage: workers may not like change or are not as good at all tasks, workers will require additional training which increases costs
• award scheme: the worker is given recognition of hard work, wan be a certificate or employee of the month

  advantage: workers feel valued, workers feel their hard work is recognised

  disadvantage: some workers may feel they aren't recognised as it is only once a month, may create conflict between workers who don't get recognised
• job enrichment: workers are given more responsibility

  advantage: workers feel valued and that their opinion matter, workers feel trusted that they can make decisions

  disadvantage: workers may make the wrong decision, workers may feel that they are making all the decisions and are not supported
• job enlargement: workers are given more tasks to complete

  advantage: workers have lots of tasks to do so they don't get bored, workers get a sense of achievement from completing tasks

  disadvantage: workers may be overwhelmed by the amount of jobs they have to do, workers may rush to get jobs finished which can effect quality
• if businesses can motivate staff it ultimately leads to:

  • high worker productivity
  • reduced level of worker supervision
  • low worker absenteeism
  • improved quality
  • staff retention - limits recruitment costs, saves time and will be easier to recruit in the future