ERG Theory / Alderfer MotivationTheory

Clayton Alderfer proposed the ERG theory in a condensed version of Maslow’s hierarchy of need to address some of the limitations of Maslow's hierarchy. This is very similar to Maslow but maybe a bit more rational.

ERG is abbreviation of Existence, Relatedness, and Growth.

ERG theory is hierarchical. - Existence needs are at first level and have priority over relatedness needs which are at second level. Relatedness needs have priority over growth.

However, ERG theory does not assume a rigid hierarchy where a lower need must be substantially satisfied before one can move on. He suggested that more than one need may be activated, sought to be satisfied by the individual, at the same time than a hierarchy.

Alderfer three categories of needs are ordered hierarchically as

Existence (physical well-being)

It refers the concern with basic material existence requirements. Those needs to sustain life , such as food and water, as well as such work-related forms as pay, fringe benefits and physical working conditions. (Maslow’s physiological and safety needs).

In a work context this need is satisfied by money earned in a job for the purchase of food, shelter, clothing, etc.

Relatedness (satisfactory relations with others)

It refers to the desire we have for maintaining interpersonal relationships, such as relationship with families, friendship groups, work groups and professional groups. The need to feel a sense of belonging, affiliation, and friendship .( Maslow’s interpersonal security, social need, and the external component of esteem need).

In a work context and given the amount of time most people spend at work this need is normally satisfied to some extent by their relationships with colleagues and managers.

Growth (development of competence and realization of potential)

It refers to an intrinsic desire for personal development and development of one's potential. Impel a person to make creative or productive effects on himself and his environment. It impel creativity and innovation, along with the desire to have a productive impact on surroundings. (the intrinsic component of Maslow’s esteem need, and self-actualization).

These needs are all about by personal development. In a work context a person's job, career, or profession can provide a significant satisfaction of growth needs.

Alderfer's Hierarchy of Motivational Needs

Level of Need	Definition	Properties	Examples
Growth	Impel a man towards creativity and innovation, along with the desire to have a productive impact on himself , environment and surroundings.	Satisfied through using capabilities in engaging problems; creates a greater sense of wholeness and fullness as a human being	Promotion, recognition, Authority, learning something new
Relatedness	Involve relationships with significant others	Satisfied by mutually sharing thoughts and feelings; acceptance, confirmation, under- standing, and influence are elements	Relationship with families, friendship groups, work groups and professional groups.
Existence	Includes all of the various forms of material and psychological desires	When divided among people one person's gain is another's loss if resources are limited	food and water, as well as such work-related forms as pay, fringe benefits and physical working conditions.

A Reorganization of Maslow's and Alderfer's Hierarchies

Level	Introversion	Extroversion
Growth	Self-Actualization (development of competencies [knowledge, attitudes, and skills] and character)	Transcendence (assisting in the development of others' competencies and character; relationships to the unknown, unknowable)
Others (Relatedness)	Personal identification with group, significant others (Belongingness)	Value of person by group (Esteem)
Self (Existence)	Physiological, biological (including basic emotional needs)	Connectedness, security

Frustration-Regression principle

Alderfer also deals with frustration-regression. That is, if a higher-order need is frustrated, an individual then seeks to increase the satisfaction of a lower-order need. ERG theory counters Maslow’s theory by noting that when a higher- order need level is frustrated the individual’s desire to increase a lower- level need takes place. Inability to satisfy a need for social interaction, for instance, might increase the desire for more money or better working conditions. So frustration can lead to a regression to a lower need.

For example if a person is continually frustrated in their attempts to satisfy growth needs (e.g. gain promotion), relatedness needs may assume greater importance (e.g. social relations at work), this lower level need becoming the focus of the individuals efforts. Alderfer's research support the idea that lower level needs does not decrease in strength as they become more satisfied, as opposed to Maslow.

Differences from Maslow's Hierarchy

In addition to the reduction in the number of levels, the ERG theory differs from Maslow's in the following three ways:

an individual would stay at a certain need level until that need was satisfied.

· Maslow's hierarchy of need have 5 levels while ERG theory have three levels.

· Unlike Maslow's hierarchy which says , an individual would stay at a certain need level until that need was satisfied, the ERG theory allows for different levels of needs to be pursued simultaneously.

· The ERG theory allows the order of the needs be different for different people.

· The ERG theory acknowledges that if a higher level need remains unfulfilled, the person may regress to lower level needs that appear easier to satisfy, known as the frustration-regression principle.

Implications for Management

· In the work situation we might apply ERG to seek alternative satisfiers / motivators for staff when a primary need cannot be satisfied. If a person’s needs at a particular level are blocked, then attention should be focused on the satisfaction of needs at other levels. A Subordinates growth needs may be blocked because the job doesn’t allow sufficient opportunity for personal development, If the ERG theory holds, then unlike with Maslow's theory, managers must recognize that an employee has multiple needs to satisfy simultaneously. then by applying ERG the manager should attempt to provide greater opportunities for the subordinate to satisfy existence and relatedness needs, which are still genuine motivators for the individual.

Summary

ERG theory argues, like Maslow, that satisfied lower- order needs lead to the desire to satisfy higher-order needs; but multiple needs can be operating as motivators at the same time, and frustration in attempting to satisfy a higher- level need can result in regression to a lower- level need.

Reference

http://www.examstutor.com/business/resources/studyroom/people_and_organisations/motivation_theory/6-alderferneeds.php

http://managementconsultingcourses.com/Lesson20Motivation&ItsTheories.pdf

http://motivationcentre.blogspot.com/2006/03/alderfers-erg-theory.html

http://www.zainbooks.com/books/management/principles-of-management_35_other-theories-of-motivation.html

Maslow's Theory

Maslow's Hierarchy of Needs

If motivation is driven by the existence of unsatisfied needs, then it is worthwhile for a manager to understand which needs are the more important for individual employees. In this regard, Abraham Maslow developed a model in which basic, low-level needs such as physiological requirements and safety must be satisfied before higher-level needs such as self-fulfillment are pursued. In this hierarchical model, when a need is mostly satisfied it no longer motivates and the next higher need takes its place.

Maslow's hierarchy of needs is shown in the following diagram:

Maslow's Hierarchy of Needs

Physiological Needs

Physiological needs are those required to sustain life, such as:

• air
• water
• nourishment
• sleep

According to Maslow's theory, if such needs are not satisfied then one's motivation will arise from the quest to satisfy them. Higher needs such as social needs and esteem are not felt until one has met the needs basic to one's bodily functioning.

Safety Needs

Once physiological needs are met, one's attention turns to safety and security in order to be free from the threat of physical and emotional harm. Such needs might be fulfilled by:

• Living in a safe area
• Medical insurance
• Job security
• Financial reserves

According to Maslow's hierarchy, if a person feels that he or she is in harm's way, higher needs will not receive much attention.

Social Needs

Once a person has met the lower level physiological and safety needs, higher level needs become important, the first of which are social needs. Social needs are those related to interaction with other people and may include:

• Need for friends
• Need for belonging
• Need to give and receive love

Esteem Needs

Once a person feels a sense of "belonging", the need to feel important arises. Esteem needs may be classified as internal or external. Internal esteem needs are those related to self-esteem such as self respect and achievement. External esteem needs are those such as social status and recognition. Some esteem needs are:

• Self-respect
• Achievement
• Attention
• Recognition
• Reputation

Maslow later refined his model to include a level between esteem needs and self actualization: The need for knowledge and aesthetics.

Self-Actualization

Self-actualization is the summit of Maslow's hierarchy of needs. It is the quest of reaching one's full potential as a person. Unlike lower level needs, this need is never fully satisfied; as one grows psychologically there are always new opportunities to continue to grow. Self-actualized people tend to have needs such as:

• Truth
• Justice
• Wisdom
• Meaning

Self-actualized persons have frequent occurrences of peak experiences, which are energized moments of profound happiness and harmony. According to Maslow, only a small percentage of the population reaches the level of self-actualization.

Implications for Management

If Maslow's theory holds, there are some important implications for management. There are opportunities to motivate employees through management style, job design, company events, and compensation packages, some examples of which follow:

• Physiological needs: Provide lunch breaks, rest breaks, and wages that are sufficient to purchase the essentials of life.
• Safety Needs: Provide a safe working environment, retirement benefits, and job security.
• Social Needs: Create a sense of community via team-based projects and social events.
• Esteem Needs: Recognize achievements to make employees feel appreciated and valued. Offer job titles that convey the importance of the position.
• Self-Actualization: Provide employees a challenge and the opportunity to reach their full career potential.

However, not all people are driven by the same needs - at any time different people may be motivated by entirely different factors. It is important to understand the needs being pursued by each employee. To motivate an employee, the manager must be able to recognize the needs level at which the employee is operating, and use those needs as levers of motivation.

Limitations of Maslow's Hierarchy

While Maslow's hierarchy makes sense from an intuitive standpoint, there is little evidence to support its hierarchical aspect. In fact, there is evidence that contradicts the order of needs specified by the model. For example, some cultures appear to place social needs before any others. Maslow's hierarchy also has difficulty explaining cases such as the "starving artist" in which a person neglects lower needs in pursuit of higher ones. Finally, there is little evidence to suggest that people are motivated to satisfy only one need level at a time, except in situations where there is a conflict between needs.

Even though Maslow's hierarchy lacks scientific support, it is quite well-known and is the first theory of motivation to which many people they are exposed. To address some of the issues of Maslow's theory, Clayton Alderfer developed the ERG theory, a needs-based model that is more consistent with empirical findings.

REFERENCE : www.abahe.co.uk

BCG Matrix

The Boston Consulting Group (BCG) Matrix is a simple tool to assess a company’s position in terms of its product range. It helps a company think about its products and services and make decisions about which it should keep, which it should let go and which it should invest in further.

 

That model was developed by Boston consulting group in 1970’s. That matrix also incorporates the product life cycle concept. That model can be used to access the position of strategic business units and very helpful for the organizations operating in number of different markets.

 

BCG MATRIX

 

 

Brands or items can be referred to as strategic business units (SBUs) because each is viewed as a separate entity with its own set of market conditions and competitors. BCG matrix shows various SBU on graph of Market growth Vs Market share. It has four cells and cells within the matrix are classified using the SBU’s ability to act as a source of funds (e.g., relative market share or competitive position) and its need for funds based on future growth potential (e.g., market growth rate or industry attractiveness). Placing products in the BCG matrix results in 4 categories in a portfolio of a company.  To use the chart, analysts plot a scatter graph to rank the business units (or products) on the basis of their relative market share and growth rates.

 

The BCG matrix’s’ four cells based on two axes. The horizontal axis is labeled relative market share. Relative market share refers to a firm’s market share relative to its largest competitor. The vertical axis is labeled market growth. The market growth rate is usually based on average annual growth rate over the last few years, depending on the age of the industry or category.

 

Two other factors are important in evaluating SBUs: the size of the circle and the placement within the cell.

 

The size of the circle representing each SBU gives an indication as to the actual size of the unit measured in sales or volume. This is important because some SBUs may generate a good deal of revenue based on absolute volume but not look as attractive in terms of relative market share and market growth rate.   The SBU’s placement within the cell is also important because the axes represent a continuous scale even though there are only two labels. Two SBUs could be on opposite sides of the same cell and should be viewed differently.

 

 

The SBU’s placement within the cell is also important because the axes represent a continuous scale even though there are only two labels. Two SBUs could be on opposite sides of the same cell and should be viewed differently.

 

Four categories are as following

 

Stars	(high growth, high market share)
	These products generate high amounts of income as they are in high growth markets with a relatively high share of that market. However, they require large amounts of investment because of their high growth rate. These are normally known are raising star. When the market growth rate decree ses, a star will become a cash cow, if it maintains its large market share. A diversified company should have stars that have the potential to become the next cash cows in their portfolio to ensure future cash generation.
Basic Strategic Rule	·         Maintaining relative market share ·         Keeping sufficient funding available
Cash Cow	(low growth, high market share)
	These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth. Cash cows provide the cash required to turn the question marks into market leaders , to cover the administrative cost of the company, to fund research and development, to service the corporate debt and to pay dividends to share holders. Because the cash cow generates a relatively stable cash flow, its value can be determined with reasonable accuracy by calculating the present value of its cash stream using a discounted cash flow analysis.
Basic Strategic Rule	Gaining relative market share Accepting losses ·         Profits and cash generation should be high , and because of the low  growth, investments needed should be low. Keep profits high ·         Foundation of a company
Question Mark	(high growth, low market share)
	These products have low market shares and do not generate much cash. However, these products are in a rapidly growing stage and thus consume large amounts of cash. A question mark (also known as a "problem child") A question mark has the capability to gain market share when the market growth slows, and can thus become a star and finally a cash cow. Before making the investment required to grow the market share. Question marks must be analyzed carefully in order to determine their potential.
Basic Strategic Rule	·         Maintaining relative market share ·         Exploiting cost-cutting potential ·         Releasing funds
Dog	(low growth, low market share)
	Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. The products that fall in this cell are the ones with a low share of a low growth market. These products do not generate revenues for the company. Firms should get rid of the products that fall in this cell as they tend to require huge investments from time to time.
Basic Strategic Rule	Abandoning hopeless products Minimizing losses ·         Avoid and minimize the number of dogs in a company. ·         Beware of expensive ‘turn around plans’. ·         Deliver cash, otherwise liquidate

 

 

Limitations of BCG Matrix

  

• High Market Share is not the only factor to measure competitive advantage. The matrix is just based on one factor each in industry attractiveness and competitive advantage. It tends to ignore a number of highly important factors as determinants of profitability. Similarly, Market growth rate is not the only factor to measure industry attractiveness. 
• The framework is based on the assumption that each business unit is independent of the others and their activities are mutually exclusive. Sometime a dog SBU used as synergy to other SBUs. However, in practicality, a business unit that is “dog” may be helping other business units gain a competitive advantage. Sometimes Dogs [of a huge market] can earn even more cash as Cash Cows.