IMPLICATIONS OF USING EXPECTANCY INSTRUMENTAL VALENCE THEORY AS A REWARD SYSTEM FOR MIDDLE AND LOWER LEVEL MANAGERS

INTRODUCTION

Middle level managers are the tactical managers acting as a link between the strategic and functional managers. Their roles in business processes and decision making cannot be overlooked; hence they need to be adequately motivated. One of the theories that attempt to come up with better system of motivating middle-level managers is the Expectancy Valence theory.

WHAT IS EXPECTANCY VALENCE THEORY?

It can be argued that we all have at one point in time or the other acted in line with the basic theme of E-I-V as we constantly act (rationally or irrationally) in anticipation of reward or returns. In most part of the world, kids always expect their parents to give them some sorts of reward after succeeding in a major exams, this expectation acts as a motivating factor. Management Accountants expects be rewarded with good job after qualifying as a chartered accountant, managers naturally expect the value of the company to grow and eventually translate into higher perks after identifying projects with positive NPV through the investment appraisal process, A financial planner expects to raise his charges when there are good number of happy clients. The list can go on and on but, it will be wise to cut it here as the basic idea of expectancy theory has been passed.

Definition of three key terms of expectancy valence theory

EIV stands for Expectancy Instrumentality Valence. The three key words here are explained in a simple language below:

Expectancy; the desire aroused by trusting in merit caused by our imagination. When you expect to come up with a positive outcome simply because you have put in more effort, is a good way of explaining this. This is natural with human beings.

Valence: the use of perceived result while making decisions. This is closely linked to the expectancy variable in the equation.

Instrumentality: this is an example of where cause-effect principle is demonstrated. The belief that if I complete a pre-determined action, then I will get this expected result.

Using E-V as a foundation upon which the reward scheme of middle level managers are built would have the following implicit effects on the motivation of the managers and this will ultimately reflect on the overall performance of the business as an entity.

  • LOSE OF MOTIVATION: the fact that E-V is based on the premise that efforts leads to reward is enough to de-motivate managers that have made some attempts and could not meet the target set by the top (strategic) management.  Middle managements may lose motivation immediately their expectations are not met. This is as a result of the fact that motivational force for a behavior is based on three distinct perceptions, i.e. EXPECTANCY is a function of three variables that complements one another. Namely: Expectancy, Instrumentality, and Valence. You quickly lose out in all as soon as you lose out in one of them.
  • ENCOURAGES SHARP PRACTICES: armed with the knowledge that what they produce will affect their remuneration, managers tend to act sub-optimally. Again, managers have no choice than to work against the company if the company does not produce adequate reward for the effort they have put. This in turn gave rise to the problem of defining what mearnt by adequate reward is.
  • ENCOURAGES UNHEALTHY COMPETITION: middle managers of the same level may engage in cold-war if one perceives the decision of another as not having any value. This has nothing to do with motivation, but mere misunderstanding. The manager that misunderstands the other would now start working against the other, without taking time to view things from the perspective of the proposing manager. For example, a senior systems analyst may see training of team that will replicate what she does as her job, while systems and programming managers thinks she should be solely responsible for executing projects. The effort of the senior analyst will no doubt encourage knowledge management (making your skills and expertise transferable).
  • AVOIDANCE OF RESPONSIBILITY AND WORK: middle managers may want to avoid being involved in any worthwhile venture if they perceive that they expected result would not be favourable. You will agree with me that businesses immediately start declining as soon as they stopped being innovative and creative. Rather than use a system of reward tied to the expected result or outcome of a project, room should be created for errors and risk involved in ‘entrepreneurism’ which is basically what middle managers do in business.
  • FAILURE TO MEET ANY OF THE COMPONENTS OF E-V WILL AUTOMATICALLY LEAD TO FUTILE EFFORT: Vroom, Lawler and Porter claim that motivation, as described in VIE theory, is a combination of all three functions (valence, instrumentality, and expectancy). If all three functions are operating at high levels, then there will be high motivation. But should any one function be zero, and then the overall level of motivation will be zero. A middle manager who believes that his effort will result in high performance of a operations, and that there will be appropriate reward, will have a motivation of zero if the valence (perceived value of the reward) is zero. That is to say that if top management did not see the effort as having any value, the manager would lose the motivation of trying any harder.
  • Promotes short-term benefits at the expense of ‘more valuable’ long-term benefits: because managers knows that what their perks at the end of every period is directly tied on the results they can produce, they will tend to disregard any good alternative that will benefit the company in the long run.

 

There has been a mixed response to VIE theory, but some aspects have received much support, especially the links between expectancy and instrumentality and their impact on motivation.

The removal of reward systems will lead to de-motivation. If everyone is to be judged based on overall company performance, the issue then becomes; what is in it for me? A balance in the plain has to be sought where employees’ motivation will be based on reasonable mix of financial and non financial factors. The use of a balance score card (BSC) tends to be the norm now in most forward looking companies. BSC combine both the feedback elements of control and reward systems with feed forward control and reward system. This is relatively new in the field of managerial accounting.

The motivation of workers in the expanding business environment will be improved if it can be seen that  that effort leads to performance improvement. Workers who receive training to do their jobs more effectively and efficiently will be more highly motivated and achieve higher levels of performance for their efforts.

The demographic changes will demand reassessment of the perceived reward values. We see more need for ‘menu-style’ reward systems – incentive systems which allow managers to select their compensation package from a range of options (additional holidays, improved insurance benefits, more flexible working hours), rather than being tied to projects that they don’t in most cases have control over.

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