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• Spring 2013 Expectancy Theory
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# Spring 2013 Expectancy Theory

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Expectancy theory is one of the stronger methods for explaining motivation because it utilizes an individual approach. To explain expectancy theory you have to understand the link between effort, performance, and outcome. This theory is based on an individual's perception of a desired outcome. In other words, why is a person motivated to achieve something and for what reason? By breaking down three critical topics; valence, instrumentality, and expectancy, we can better understand the process.

Valence is the value of the outcome to the individual and the source of motivation between what your effort and outcome. Higher valence levels mean a stronger connection and a better understanding of the outcome.

Instrumentality is the connection between performance and outcome. When a companies reward system works well, higher levels of instrumentality exist.

Expectancy is what the person expects to get from certain efforts. For example, if a person works hard they expect certain rewards.

The image below illustrates the concept.

Image from http://myhrm.wikispaces.com/

The level of motivation is calculated by finding subject probabilities for the above criteria, and range from -1 to +1 for valence, and 0 to +1 for instrumentality and expectancy. Then, all the variables are multiplied to find the total probability or level of motivation of the person. Because negative and zero values are possible, if any area is low, the outcome will be low resulting in poor motivation. This system also is based on a conscious perception that means people are actively engaged in the process and can make accurate connections between these areas.

Details of the Case Study

A very successful, privately-owned, manufacturing company, with 3 owners who were directly involved in the day-to-day management of company, had a very progressive evaluation and reward structure in place.  During the 1990’s, it was not common for companies like this to have generous profit-sharing programs in place.  This company had implemented a profit-sharing program in the 1980’s which had proven to be a good motivation and retention tool for them.  The profit sharing pool was distributed equally to all employees on a quarterly basis , calculated as a percent of their annual salary.  Additionally, performance objectives were established by the owners, and cascaded down through the workforce teams, so individuals were aligned on the work they performed to meet the company objectives.

This company employed more than 1,000 individuals in a single location, and had undergone expansion to other locations in the early 1990’s.  The company was known throughout the area as a great employer; one which rewarded their employees for hard work and performance through company profit-sharing and a very patriarchal culture.   There was a formal performance review process in place at this company.  The annual performance review was all about whether or not each employee met their specific objectives set at the beginning of the year.  If a person was not meeting the objectives, they were aware of that long before the performance discussion had an opportunity to occur.  In those cases, which were very rare, an individual probably did not work there long enough for the annual performance review to happen.

Due to the failing health of the majority stockholder, the company was sold to a larger, publicly-held, corporation in 1998.   Employees from this company were retained by the buyer, and integrated into the new company’s HR practices.  There were significant differences in how performance objectives and people management were handled in the new company, which resulted in a significant decline in employee morale, and high turnover for the first several years of the acquisition.

In the new company, employee performance objectives were established at the discretion of individual supervisors,  with no linkage to specific company goals, nor common objectives across departments or locations.  The profit sharing had been eliminated with the sale of the company, and employee merit increases and annual bonus incentives were now tied to performance management processes.  These processes were viewed as extremely subjective, and with inconsistent requirements across the workforce.  Additionally, the culture of the new company had a deeply-embedded practice of impression management, which created a lack of trust within the workforce.  For many employees, this culture was very de-motivating, because many individuals  felt that “impression management” was the only skill that mattered in the new company.

During the first several years of the acquisition, some very valued employees left the new company, because they did not feel there was any link between the work they did every day and the reward structure in the new company.  They witnessed multiple situations where new leaders were promoted into roles they didn’t seem to be qualified to do, but who were quite skilled at making a good impression on certain managers.  Also, there was a general decline in overall compensation packages, since annual bonuses were awarded on subjective recommendations by individual supervisors, rather than a common approach.  This practice caused much distrust within the company.

Over the last decade, the company did put a standard, formal performance management process in place, and that has changed the landscape considerably.  The practices force very objective and measurable performance goals across all levels of the organization, people are ranked against their peers, etc.  The activity is now capable of being used as a motivator, because employees work with their managers to set objective, relevant goals, establish targets (which can be overachieved.)  Individuals can now see the tangible results of performance against those objectives in the form of merit increase policies, and other compensation and recognition practices, in the company.

Case Analysis

Expectancy
We define expectancy theory as the way a person perceives how much their effort or behavior can influence a desired outcome.  So the motivating factor here comes when a person’s efforts can create a level of performance that will result in a valued outcome.  (Vroom 1964,1993) This is the link between effort and performance.
In this case we notice that when the bonus compensation structure changed from one of measurable goals and defined performance, to one of ambiguity and discretion, the overall motivation of the employees decreased. The reason this happened was because the employees’ expectancy of their level of effort resulting in acceptable performance and being able to achieve their bonus did not exist for them. The employees did not have clear performance goals by which to raise their efforts to after the acquisition, but when structure was re-implemented and performance tasks set, employees were motivated to increase their efforts in order to perform to these standards.

Instrumentality
Instrumentality is the link between the performance of the individual and the resulting outcome. A strong instrumentality is when the individual gets more of what they want directly correlated by their level of performance.
What we notice in this case study is that when structure is removed and there becomes no discernible link between performance and outcome, the employees were less motivated to apply effort. When structure and targets were reintroduced, this changed and performance became again directly linked to reward/outcome. The employees responded positively and now feel more motivated at work.

Valence
Valence is the value of an outcome, and this varies from person to person as we all value different things for different reasons. The reason valence is important here is that in order for a person to feel motivated to attain an outcome, they must first value and desire that outcome. By profit sharing in the way they previously did, the company rewarded its employees both financially and gave an inclusive reward by sharing these bonuses proportionately out. This would have fostered an environment of organizational cohesiveness and harmony, the employees felt a sense of ownership which is an outcome most employees desire. When profit sharing was taken away, some of the reward was lessened, and thus motivation dropped.

Impression Management

This case study also raises the application of Impression Management; "Impression management is an active self-presentation of a person aiming to enhance his image in the eyes of others" (Sinha, 2009 p.104). With the lack of structure and defined generalized goals, managers were able to offer discretionary bonuses and promotions. This would lead to an increased level of impression management, across the organization. Employees would quickly realize it mattered less about how well they performed if their bosses liked them or that they at least appeared to be vital workers.

Image from

The Combination of Expectancy, Instrumentality, and Valence

Expectancy, instrumentality, and valence all combine to create a motivational force (Vroom 1964, 1995). The expectancy theory is much like the law of effect; people are motivated to maximize pleasure and avoid pain. There is a motivational force within a person that pushes them towards their goals. The larger the motivation, the harder the person will work to attain the goals. As mentioned above, for each possible outcome, valence and instrumentality scores are multiplied. The valence-instrumentality product is then added together for a total, then multiplied by the expectancy to create a motivational force score. Force will only be high when all three categories are high. Even though there are three factors in this equation, if one factor is a zero, then there is zero motivation.

This is evident in our case study because before the company was sold in 1998, there was clearly high motivation among employees and there were no categories with a score of zero. All of the employees understood how their performance was evaluated before the company was sold and it is evident that employees were motivated to succeed because of the support they received from the company to reach their goals. After the company was sold, and the profit sharing disappeared and merit increases and annual bonuses were given at the discretion of the direct supervisor, clearly one or more categories of motivation went down to zero as turnover in the company began and motivation decreased. It is paramount that company’s understand the direct correlation between these three factors and how they work together. Unfortunately, in this situation, motivation was lost and ultimately the company suffered.

References

Sinha, J. B. (2009). Culture and Organization National Behavior. Sage Publications.
Vroom, V.H. (1964). Work and Motivation. New York: Wiley
Vroom, V.H. (1993). Work and Motivation (2nd edition). New York: Wiley

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