Optimum Currency Area (OCA) Theory

Optimum Currency Area (OCA) Theory What criteria did Mundell use to identify an optimum currency area and how relevant are these criteria today in deciding whether two countries constitute an optimum currency area? An Optimum Currency Area (OCA) is a geographical region in which maximise economic efficiency is attained by the entire region sharing a single currency (a monetary union), or by several currencies pegging to each other via a fixed exchange rate. National authorities have come to the realisation that by merging with other countries to share a currency, everyone might benefit from gains in economic efficiency. An example of this can be seen in the formation of the euro where the countries involved do not individually match the criteria of an OCA, but believe that together they come close. The aim of national authorities is to establish the correct form of economic integration to maximise efficiency. One of the original founders of the OCA theory was economist Robert Mundell. In his first paper ‘A Theory of Optimum Currency Areas (1961) he presented several principal criteria to create a functioning monetary union. To support these criteria for an OCA I shall on occasion refer to an example of consumer preferences switching from French to German-made products by Paul De Grauwe (2003). The change in consumer preferences will cause an upward shift in aggregate demand in Germany and a downward shift in France as shown in 1 below. The output decline in France and increase in Germany is most likely to cause unemployment to increase in France but decrease in Germany. The first of the criteria for an OCA is price and wage flexibility throughout the geographical area. This means that the market forces of supply and demand automatically distribute money and goods to where they are needed. For example, with regards to France and Germany under perfect wage flexibility, the unemployed workers in France will reduce their wage claims, and conversely excess demand for labour in Germany will push up the wage rate. This inevitably shifts aggregate supply for France outwards making French products more competitive, and stimulating demand, whereas the opposite occurs for Germany. 2 below shows the effect of wage flexibility as an automatic adjustment mechanism. Mundell cited the importance of factor mobility as an â€Å"essential ingredient of a common currency† (Mundell, 1961) and thus labour mobility across the geographical region is one of Mundells main criteria for an OCA. In the case of De Grauwes example, French unemployed workers would move to Germany where there is excess demand for labour. This free movement of labour eliminates the need to let wages decline in France and increase in Germany solving both the unemployment problem in France, and the inflationary wage pressures in Germany. The existence of labour mobility relies on the unrealistic assumptions of free movement of workers between regions regardless of physical barriers such as work permits, cultural barriers such as language difficulties and institutional barriers such as superannuation transferrals. Indeed Peter Kenen referred to the additional costs of retraining workers and there is an â€Å"unrealistic assumption of perfect occupational mobilityâ€Å"(Kenen, 1969). Ronald McKinnon observed that â€Å"in practice this does not work perfectly as there is no true wage flexibility† (McKinnon, 1979). McKinnon is simply highlighting the point that in reality wage flexibility, as well as perfect labour and capital mobility do not always exist. Considering a case where wages in France do not decline despite the unemployment situation (no wage flexibility), and French workers do not move to Germany (no labour mobility) both Germany and France would be stuck in the original position of disequilibrium. In Germany the excess demand for labour would put pressure on the wage rate, causing an upward shift in the supply curve. The adjustment from the position of disequilibrium would in this case come exclusively from price increases in Germany making French goods more competitive once more. Therefore if wage flexibility and labour mobility does not exist then the adjustment process will be entirely reliant on inflation in Germany. Mundell stated product diversification over the geographical area is an important determinant of the suitability for a region to share a currency. This has been supported by many economists, such as Peter Kenen who says â€Å"groups of countries with diversified domestic production are more likely to constitute optimum currency areas than groups whose members are highly specialised† (Kenen, 1969). Finally Mundell stated that an automatic fiscal transfer mechanism is required to redistribute money to sectors with adverse affects from labour and capital mobility. This usually takes the form of taxation redistribution to less developed areas of the OCA. Whilst this is theoretically ideal and necessary, in practice it is extremely difficult to get the well off regions of the OCA to give away their wealth. Mundell produced two models in relation to OCA theory. In the first, under a model of Stationary Expectations (SE), he takes a pessimistic view towards monetary integration, however in his second paper he counters this, and focuses on the benefits of a monetary union under the model of International Risk Sharing (IRS), which has conversely been used to argue for the forming of monetary unions. ‘The Theory of Optimal Currency Areas paper by Mundell in 1961 portrays OCAs under stationary expectations. The assumption is made that asymmetric shocks undermine the real economy and thus flexible exchange rates are considered preferable because a shared monetary policy would not be precisely tuned for the specific situation of each constituent region. This paper led to the formation of the Mundell-Fleming Model of an open economy which has been used to argue against the forming of monetary unions as an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. Whilst the Mundells criteria for an OCA is held in high regard my many economists, there are some criticisms levelled at him. Capital mobility is seen to have been a â€Å"greater adjustment mechanism than labour mobility† (Eichengreen, 1990) and this is a factor John Ingram criticises Mundell for ignoring. Clearly the openness of the region to capital mobility is crucial to the makeup of an OCA, as for trade to exist between participating regions, free movement of capital is necessary. However in the years that followed his 1961 paper on OCAs Mundell realised the criticisms of his previous paper and began to doubt the basic argument for flexible exchange rates as an adjustment mechanism. He became more appreciative of the adjustment mechanism under fixed exchange rates, â€Å"It was not that I had forgotten the Mundell-Fleming model, but that I had gone beyond it† (Mundell, 1997). In Mundells 1973 paper, ‘Uncommon Arguments for Common Currencies, he discarded his earlier assumption of static expectations to look at how future uncertainty about the exchange rate could disrupt the capital markets by restraining international portfolio diversification and risk-sharing. Here he introduces his second model of OCAs under IRS. He counters his previous idea that asymmetric shocks weaken the case for a common currency by suggesting that a common currency can reduce such shocks by sharing the burden of loss. He uses the example of two countries, Capricorn and Ca ncer. In spring, Cancer ships half of its crop to Capricorn and in return it receives evidence of Capricorns debt, a claim to half of Capricorns food crop in autumn. While one country is expanding its money supply and running a balance of payments surplus, the other will be running a balance of payments deficit, and the process is reversed during the next period. Mundell points out that this system is very satisfactory in a world of certainty, however in reality there is speculation about the convertibility of foreign currencies. If Cancer had a bad harvest and produced less crop, to redeem all of notes from the Capricorn would involve providing them with their promised share of crop as usual, leaving Cancer short. The only defence against paying out the promised share of crop would be a devaluation of Cancers currency and thus a reduction in the claim by Capricorn on the crop. Capricorn needs to get enough crops to survive and produce food in the autumn, so Cancer will not also be left short on supplies in the next period. The solution would appear to be a partial devaluation of Cancers currency, so that the burden of loss would be shared between the two countries. Mundell has shown that with different currencies comes the uncertainty of devaluation, a problem which a common currency would not have. Under a common â€Å"world† currency if Cancer has a bad crop the total amount of world currency will exchange for full quantity of crop, irrespective of who holds the money as competition and freedom of arbitrage assures a single price. So long as competition exists, and there are no time lags in the transmission of goods or information, the price of the food will rise for both countries and so the burden of shock is shared automatically and equally by the two countries. To reconcile Mundells two papers and assess the appropriateness the criteria on determining two countries suitability as a currency area I have decided to look at the case of the European Monetary Union (EMU) and its success as a monetary union. There are many examples of countries within Europe that would struggle to maintain international competitiveness without the currency area. The areas of the EU with low labour mobility are furthest away from meeting the criteria of a currency area. However, while the removal of legal barriers (such as visas) has improved this labour mobility, issues such as language barriers remain, for example, a French worker may not wish to move to Spain because they cannot speak Spanish, also people tend to have ties to the places they currently live and may not be willing to move away from them. Bayoumi and Eichengreen (1992) compared the US and Europe with respect to how disturbances in separate regions match shocks in a selected benchmark region. They chose Germany as the benchmark for Europe and found that there is a relatively high symmetry of disturbances within the core of the EU such as Austria, Benelux, Denmark, France and Germany. They also found that the symmetry was lower for western European countries. When compared to the USA, the EMU had a higher probability of asymmetric shocks. However according to Fidrmuc and Korhonen (2001) the extent of the asymmetric shocks is declining in the EU economies. Bayoumi and Eichengreen believe that countries within Europe are further from an OCA than regions in the USA, and so are less appropriate as a currency area. These studies suggest that two countries in the EU are less suited to forming a monetary union than the regions of the USA, although the situation is improving. Frankel and Rose (1998) argued that the higher the trade integration, the higher the correlation of the business cycles among countries, in other words there is greater symmetry of shocks. They also propose that business cycles and trade integration are inter-related and endogenous processes to establishing a currency union. Frankel and Roses empirical findings noted that EMU entry encourages trade linkages among countries and causes the business cycle t o be more symmetrical among the unions participants. Rose and Stanley (2005) find that a common currency generally increases trade among its members between 30% and 90%. These findings agree with Mundells argument that a common currency can help to deal with asymmetrical shocks. Frankel and Roses findings suggest that although two countries considering creating a common currency may not meet the criteria before they join the currency area they may do afterwards. Economists are divided in opinion between Mundells two OCA models. The contrasting views which Mundell presents in his papers have earned him a title as â€Å"the intellectual father to both sides of the debate†. While some economists support the theory of stationary expectations, preferring flexible exchange rates, and conclude against the euro, others advocate the IRS model, preferring the fixed exchange rate, and conclude in favour of the euro. Mundell himself seems to have eventually settled in favour fixed exchange rates in a monetary union however he does still advocate the use of flexible exchange rates in two cases. In the case of unstable countries, whose inflation differs significant from its currency sharing regions and in large countries where there is no established international monetary system, e.g. the USA. From Mundells studies I can conclude that two countries which are heavily integrated through highly mobile factors of production which are highly diversifie d in their goods should join a common currency. With regard to the relevance of Mundells theory today I would say his studies are still valid and used heavily as complementary theory to monetary integration occurring in Europe and throughout the world. References Robert Mundell ‘A Theory of Optimum Currency Areas, 1961 ‘Uncommon Arguments for Common Currencies p. 115, 1973 A Conference on Optimum Currency Areas at Tel-Aviv University, 5th December 1997 Paul De Grauwe ‘Economics of Monetary Union p. 7, 2003) Robert McKinnon ‘Money in International Exchange: The Convertible Currency System, 1979 Peter Kenen ‘The theory of Optimum Currency Areas: an Eclectic view‘, 1969 ‘Monetary Problems of the International Economy, 1969, pp. 95-100 Barry Eichengreen ‘One Money for Europe? Lessons from the US Currency Union, 1990 ‘Is Europe an Optimal Currency Area, 1991 J. Fidrmuc I. Korhonen ‘Similarity of supply and demand shocks between the Euro area and the CEECs, 2001 J. A. Frankel A. K. Rose The Endogeneity of the Optimum Currency Area Criteria pp. 1009-25, Jul 1998 A. K. Rose T. D. Stanley ‘A Meta-Analysis of the Effect of Common Currencies on International Trade, pp 347-365, 2005

Money as a Motivator Essay

This paper will discuss the subject of money as a motivator. In addition to research and a cohesive review of literature it will include two interviews with prominent managers which will be analyzed to further enrich the knowledge of the subject by taking advantage of their hands-on experience. I- Introduction: Money, A motivator?Money! That is the violent war between employers and employees. Indeed, motivating employees through the use of money as a material reward or motivator for work achievement is and has always been a matter of controversy. Many theorists tackling motivation theories, human nature in general and motivation in particular, have accordingly examined this issue and yet they did not give the same answer as whether money can motivate workers for work or not. This shall form the main core of this projectBut before tackling this sensitive issue, let us see what does Motivation in general entails? Motivation suggests the strong desire to do one’s job well with an initiation to receive a complement either of moral or material satisfaction. Employers have employed material incentives in the form of extra hours with extra pay, some others give too much importance to the stability of the workers with satisfying their necessaries of life; whereas others have much stressed human relations, good contacts with prospective outcomes, promotion, and occupation with high responsibilities potential. There is no shortage of theories about motivation, and the relation between money and motivation in particular was central to most of them since money has always been held as the bread and butter of each worker and the carrot or the stick with which the employers control the goal achievement processes. Next we briefly review some of the most important motivation theories and there approach on money. II- Review of literature and previous studies:(A) Theories of Human motivation and their relation to money:* The Hierarchy of NeedsThis theory is probably the best-known motivation theory. It was coined by Abraham Maslow during the 1940s and 1950s. In essence, it states that our motivations are dictated primarily by the circumstances we find ourselves in, and that certain ‘lower’ needs need to be satisfied before we are  motivated towards ‘higher’ accomplishments. Maslow indicated five distinct stages, starting at physiological needs and ending at self-actualization needs. In practice, the first stage in the hierarchy, the physiological stage, which contains the needs the employee first tries to satisfy such as food, shelter†¦ indicates that pay is a good motivator within this stage. Money is the supplier of food, medicine, shelter, clothing†¦ but as soon as thee basic needs become satisfied and the employee moves to higher stages within the hier archy, pay becomes less and less a motivator. Money can’t buy safety, a sense of belonging, self esteem or self actualization. * Theory X and Theory YIn 1960, Douglas McGregor advanced the idea that managers had a major part in motivating staff. He essentially divided managers into two categories – Theory X managers who believe that their staff are lazy and will do as little as they can get away with; and Theory Y managers who believe that their people really want to do their best in their work. Theory X managers believe that staff will do things if they are given explicit instructions with no wiggle room, and plenty of stick if they don’t do what they are supposed to do. Theory Y managers believe their people work their best when empowered to make appropriate decisions. Managers who follow theory X’s approach, tend to rely greatly on money as both a motivator and a tool of control. Theory Y managers tend to focus also on non-monetary motivators and rely less and less on money in motivating their staff. With advances in management theories, Theory Y has begun to replace Theory X as the d ominant management philosophy in many organizations and money began to seem as a less effective tool for motivation as we will later see. * Dual Factor TheoryAnother theory to gain prominence at this time was Frederick Hertzberg’s Dual Factor theory. He identified two separate groups of factors that had a strong bearing on motivation. He called the first group ‘hygiene factors,’ because they strongly influenced feelings of dissatisfaction amongst employees. Hygiene factors include working conditions, pay, and job security. According to Hertzberg, they don’t motivate employees as such, but if they are not there, they can adversely affect job performance. He referred to the other group as ‘motivation factors’ because they had a role in positively influencing performance –  such as achievement, career progression and learning. Hertzberg went on to state that you can forget about workforce motivation if you don’t get the hygiene factors right first of all, so you have to get the pay part of the equation right. But he saw pay as not being an actual motivator in the wor k place. You can create disgruntle employees with less money, but you can’t create a motivated employee with more cash. * Equity TheoryJohn Stacy Adams posited another theory in 1965, looking at how motivation was affected by the degree of fairness within an organization, particularly within a group of peers. Consider the situation where nine sales representatives are given a company Mercedes, but one of them is given a Toyota, even though that person believes he did just as good a job as his colleagues. How would that last sales representative feel? Now there’s nothing wrong with a Toyota, but by comparing one’s own circumstances to the treatment of others in a similar situation, very intense feelings can be experienced. These feelings could lead to intense positive or negative motivations. It’s here that money can become a serious de-motivator or even a source of conflict if distribution was not seen as fair. No matter how insignificant the monetary value, a lower raise will be seen as an unfair evaluation of one’s self-conceived performance relative to others and the int ended motivating effect will be transformed into a strong feeling of inferiority and injustice. In practice, managers need to be careful in distributing money incentives within a group of peers because of the emotions this can engender. *Expectancy TheoryVictor Vroom in 1964 put forward the notion that people are driven by the likelihood of genuine success in achieving particular objectives. Three barriers need to be jumped by managers if they want to motivate their people to succeed. First of all, they need to connect the task to be performed to the likelihood of better results. Secondly they need to set expectations that there are positive benefits to the employee in achieving those results, and thirdly they need to ensure that these benefits are of value to the employee. For instance, there is no point asking your employees to be happy about coming in a half-hour early in future if you can’t properly explain how this will lead to eventual real benefits for the  employees themselves. Benefits also should be properly assessed, some employees rank money low on their priority lists, and others give it precedence over other benefits. Setting expectations for benefits that are not valued by employees will not work, managers should not take for granted that money is all that matters and probe for other benefits the employees may consider superior. * Money as a MotivatorThis theory states that all workers are motivated primarily by the need for money; so if you want to get the most out of your workforce, you pay them more. This has particular effectiveness in areas where payment is directly linked to the accomplishment of objectives. This theory is prevalent in many businesses in the form of performance-related pay, incentives, bonuses and promotion schemes. While few would argue that it does not have some validity (indeed it is the driver behind most sales forces the world over), it is not an all-encompassing theory. It doesn’t really address the sometimes complex reasons why people are motivated by money. It excludes people who are not driven primarily for money. It does not, for example, apply to voluntary organizations. In addition, it may not work if meeting the financial objectives might threaten other entitlements, creature-comforts or rights, such as an employee’s location, network of friends, employment c onditions or current level of job satisfaction. Several other related theories such as the ERG and AAP theories also tried to find out what motivates employees the most, and where does pay rank among motivators. The motivational power of money is clear in the sense that more dollars buy more things (but not all things as we discussed before), but why is money sometimes seen as a low quality motivator?(B) Money, an Over Estimated MotivatorIn our research and readings we were able to identify several problems with using money as a motivator in the work place. These points are summarized below and should be taken into consideration by the manager in his efforts to promote effectiveness and efficiency. (1) Cash becoming compensation: The great thing about choosing a monetary reward is that there’s no extra distribution method necessary. Employees view cash incentives and awards as part of their annual compensation,  Because those dollars just become part of what you take home, there’s nothing special about them. The money tends to get spent paying bills, and you don’t really do anything that’s memorable, so there’s no lasting effect relative to the dollars that you’re putting into those incentive schemes. It just becomes a part of that pile of money that you find a way to spend every month and every year. (2) A Tough Incentive to Take Away: Beyond cash’s poor ability to change behaviors, it actually â€Å"can be harmful†. In good economic times, when everyone is flush and goals are being reached, cash can be easy to give out, but when times are bad, and the cash goes away, employees will wonder where â€Å"their† money went. And studies show that they will consider it â€Å"their† money. Discontinuing a noncash incentive program has a considerably less negative impact on employee motivation than killing a cash program. (3) Buyer’s Remorse Affects Money Incentives: A family man receiving a cash award from his company is faced with a tough decision: Put the money in savings or a college fund, or use it to pay bills, or splurge on a family vacation or buy them something special. If he decides to splurge, he may regret the decision later on when a particularly large bill comes due. That quandary can have a negative effect on the overall quality of the award, an opportunity will be considered as wasted if the money is spent or saved. Many non-cash incentive awards are considered luxuries, and earning them through hard work can give employees a sense of achievement. (4) Low Trophy Value: Cash lacks trophy value and social reinforcement attributes that increase the perceived value of the non-cash award over cash, the trophy value associated with noncash incentives is just immense. An employee will always find it more pleasant to talk about a company all-expenses- paid trip, movie tickets or even a warm pad on the back from the boss, than a two hundred dollars bonus check. (5) Money Is Not Promotable: The trophy value associated with non-cash awards can have a positive effect on other employees who didn’t reach their goals and take home the award. It’s harder for the boss to say do better and you  will get a certain cash reward, than to advertise a position for the â€Å"employee of the month† award for example. Money is less promotable than other forms of motivation. (6) Cash Satisfies Needs-Not Wants: Cash is easy for companies to give away, and everybody needs it. But for true motivation, you need to give people something they want or desire, not something they need. A trip to Hawaii, on the other hand, generates memories, and a plasma-screen TV is something they’ll look at every day for years to come-and remember how they got it, a hundred dollar bill gained for an extra ordinary selling week is soon not different from a hundred dollar bill received as wage. (7) Money Is Impersonal: Sure, everyone could use more money, but what’s special about that? The best rewards cater to a particular group’s interests, and having that personal edge makes a big difference in how effective your program will be. (8) One Size Doesn’t Fit All: â€Å"There are no average employees†, average has become wider and wider around the means over the past few years, and will continue to do so. So one really can’t provide one option and think that it’s going to be appealing or motivating to the entire staff. (9) Managers Prefer Noncash: A recent study of 235 managers by the Forum for People Performance Management and Measurement showed that managers prefer non-cash employee recognition programs. According to the study, managers view non-cash awards as â€Å"more important, more effective and generally superior for achieving the majority of specific organizational objectives. (10) No Global Parity: In economic terms, it’s called purchasing power parity, which means, roughly, that the cost of living-everything from the price of a nice dinner for two to a month’s rent-can be vastly different in different parts of the world. Companies with worldwide footprints need to make sure their award offerings are equal on a global scale. A dollar, after all, goes a lot farther in some corners of the world than in others. Non-cash awards such as gift cards allow companies to offer parity in terms  of the overall worth of the award. (11) Money Is Insufficient for Some Employees: in addition for the individual idiosyncrasies of individual employees, money may not be sufficient for some people. Highly paid employees for example may prefer other benefits such as an award ceremony, a club membership, a parking space closer to the office†¦(12) Evaluation of Performance: it’s hard to put a price tag on performance. Even clear rules, such as: sell x items and y dollars, may be seen as unfair. Employees may complain about their store location, their shifts, and their managers†¦ to give an unfair flavor to a peer’s bonus. Non-cash motivators are less likely to be thoroughly criticized and have a greater motivational value. (13) A Trouble Maker: money may set employees against each other, leading to conflict in the company. Employees may also feel forced to compete and thus Money becomes a fosterer of a hostile work environment rather than a motivational tool. (C) Research Study results:Several research studies were done on the effects of money as a motivator, and its position relative to other motivational incentives. – The results of a NOVA Group study under the title â€Å"Factors employees Find Motivating† re affirmed several previous studies in which employees ranked money as fifth among motivation factors. Money was proceeded by: Interesting Work, Appreciation and Recognition, Feeling of being in on things, and Job Security. – A more recent study on done by the Hay Group on retention factors found that money ranked a staggering tenth among employee retention factors. – A research study for 57 managers conducted by Meudell & Rodham showed through analysis of questionnaires that managers saw an increase in performance among their employees for an average of just two weeks after a pay raise followed by a relapse into the prior performance levels. – Several other research papers we saw which conduct research on the effects of money as a motivator on employees of various professions showed similar results. Although the position of cash as motivator varied slightly among different working groups, it still showed that money has limited motivational power. For example In a much publicized study, Gupta and her colleagues analyzed thirty-nine studies conducted over four decades and found that cold-hard cash motivates workers as expected, but the research team acknowledges that money is not the only thing that concerns employees, noting that beyond a certain point higher salaries will make employees happier, but it will not â€Å"buy† better performance. III- Interviews, Analysis and Findings(A) The interviewsIn the process of researching the motivational power of money, we were lucky to interview two prominent managers:†¢Mr. Sami Gheriafi , Process and Institutional Planning Manager -AUB†¢Dr. Saad Andary , Deputy General Manager -BBAC BankAs a basis for the interviews, we prepared a questionnaire to address all the questions that were raised during our review of literature. Through out the interviews many more clarifying questions were asked, the end result was put into a Q&A format, and both interviews are posted in the annex at the end of the paper. (B) Interviews analysisIt was striking how the answers of two managers from two different organizations overlapped in key issues. Of course one will find differences in some approaches, but the overlap in addition to the findings we uncovered in our literature review gave us confidence in our results. Both managers gave non-monetary forms of motivation priority over money. Whether sending over-performers out of the country for advanced training to show the organization’s commitment in improving their career opportunity, or verbal and written appreciation, non-monetary motivators were found to be superior. Empowerment, delegation of authority and freedom of decision are also very important tools used in the organizations to motivate employees. On the other hand, and in compliance with our research, both managers agreed that money is important especially in a region under economic stress, but  they also argued against using it primarily. Dr. Saad Andary noted that money according to his experience may play a good role as a retention factor, noting the huge pay gap between Lebanon and the Gulf, but he doesn’t consider it as motivating. Both Mr. Sami Gheriafi and Dr. Saad Andary also indicated that money has a â€Å"timed impact† that is they as managers notice an increase in performance when a monetary reward is handed out, but this increase tend to dwindle down as the raise is spent. Non-monetary motivators tend to have a longer lasting effect on performance. On the use of money, Dr. Saad Andary pointed out that in current economic conditions, money is the managements easy way out, and even though both managers disagreed on managements ability to put a financial tag on performance, both agreed that it is not productivity that should be an issue, but also commitment to work, enthusiasm and the feeling of belonging to the company that should matter to managers. Money has a tempting impact on new comers; it refreshes the employees and energizes their performance; is an expected part of the motivational basket and if used properly and in an accurate sense will boost performance in times when a push is needed. But the use of money has its negative side as well. Money has shorter lasting effect on employees, it is less effective with employees higher up in the organizational hierarchy, money is also coupled with the firms profitability rather the employees performance in a sense that a hard working employee may not get a raise because the firm is not profitable that year, a thing which will discourage the employee especially if in more profitable years less effort lead to more money. Money also will put a huge financial burden on the company especially when employees begin to see bonuses and raises as part of their pay, they will grow more dependent on monetary rewards and this will produce a high employee turnover rate and a decrease in performance. Money, and depending on the management approach, might easily become a tool for manipulation rather than motivation. For these reasons Dr. Saad Andary forecasts that management will try to limit the negativities of â€Å"money as a motivator† by making reward more institutionalized, in a sense that staff will become shareholders and be granted stocks rather than raises. This will give rise to a partnership between the staff and the firm, the employees will no longer feel as pones moved by management, but rather  they will develop a genuine sense of belonging, and a true interest in the well being of the organization. IV- Conclusion: Money as a MotivatorAll the popular motivation theories have their flaws and detractors, but they do give us an insight into some of the mechanisms at work in day-to-day organizational life. A number of key messages ring true: firstly, people are not automatons and their reasons for behaving in a certain way are more complex than just money or laziness. Secondly, different people are motivated differently – there is no such thing as a simple, all-encompassing solution. Thirdly, it’s important to get the work environment right if you want to get the most from people; and finally, managing perceptions and expectations is very important if you want to help people get the most from their work. As a summary, Money is found not to be a default and automatic motivator, its importance is subjective and its effectiveness in motivating is relative to the type of job and the way management uses it, non-monetary motivational approaches are superior in many ways (as explained above). So if we want to finish up with one message we think that the best conclusion might be â€Å"Avoid the Cash Trap†. V-Annex(A) Dr. Saad Andary interview1)What are the motivation techniques followed in your Institution?What is the role of money in the above techniques?†¢One major form of motivation is to send staff out for training ( specially out of the country : New York, London); this is major motivating because it enhances the employee career and gives exposure to more advanced markets ( only the outstanding people are selected) . The other form of motivation is to promote and to empower the staff (to give him the freedom of decision). Money incentives: an environment which is under economic stress with high unemployment and depressed salaries and wages and also coupled with price inflation required to have constant individual raises , although this does not compensate to the huge job pricing differential between Lebanon and the Gulf); so money plays the role of retaining employees here and not motivating. 2)Do you think Money is the easy way out?†¢In our environment, yes it is, until we have sufficient economic growth to benefit from the oil boom. 3)How can you put a price tag on performance?†¢The appraisals to be reflected in the annual raises. BBAC is an institution working in the financial market where jobs can be easily assessed and priced (especially jobs related to sales, dealing, treasury, marketing†¦) where the management can pinpoint revenues or loss leading to the evaluation of the employee performance. 4)Do you notice an increase in performance after a money raise (bonus, financial reward)? And how long does it last?†¢It gives an immediate improvement in performance and lasts until the raise fade according to its amount (depend on the value of the reward). The bad thing about this is that: if it’s regular bonus or reward then it’s no longer conceived as merit where it becomes more as a salary => that’s why a money raise can’t be that effective motivator to count on. 5)From your experience, how did the concept â€Å"Money as a Motivator† develop through the past years? And where do you see it going?†¢In the banking industry : money became a norm ( bonus at end of the year for example) which is reflected by the profit of the form , so staff is identified with the concept of the profitability => there is functional relationship between â€Å"money as motivator† and † profitability† . See it going : towards becoming more institutionalized , in the sense that staff will become share holders (partners) ; employees will not be granted money but stocks which is a way of partnership that involves the staff in ownership => develops sense of belonging and last relation of employees with the firm. 6)What are the positive/negative aspects in using money as motivator (conflicts and competition between employees)?†¢ Positive: refresh the employees and energize their performance (although for just a period of time). Negative: money is coupled with the firm profitability and not directly related to the employee performance and results; the criteria set  for the rewards are not usually clear and standardized; decreases the sense of belonging towards the firm. 7)Doesn’t money trivialize work and weaken sense of belonging?†¢Yes, money trivialize work and stock option can be the right alternative for improving sense of belonging8)Money: Motivation or Manipulation?†¢Money is recognition of the surplus created by the staff; can’t be considered fully motivation or manipulation. 9)What is your conclusion (experience & personal opinion) about â€Å"Money as a Motivator†Ã¢â‚¬ ¢Money can’t be used as a direct and effective motivator due to several constraints mentioned above. (B) Mr. Sami Gheriafi interview1)What are the motivation techniques followed in your Institution?†¢It is at the discretion of the managers of each department to use various techniques to motivate employees. Among many, there is empowerment, delegation of authority, added responsibility – commensurate with seniority and financial incentives, promotions, commitment to employee professional development (mostly through training and development of talent, skills and competencies), and appreciation either verbally or in writing (aka psychological support) or, as specific to AUB, attainment of President’s Service Excellence Award, an annual award given to employees with exceptional and superior customer service and notable productivity over the prior 3 years. My personal experience has led me to the following equation Productivity = Satisfaction x Appreciation. What is the role of money in the above techniques?†¢Money is a major motivator, however, in my opinion it has â€Å"a times impact†! By virtue of human nature, people tend to feel motivated with money, but after a short period of time, usually not more than 3 – 6 months, people tend to forget about the financial increase. The money reward will certainly help improving the employee’s performance in the short term, but its impact will fade out as time passes. 2)Do you think Money is the easy way out?†¢The use of â€Å"easy way out† is a bit  on the negative side, as when you refer to a situation where people circumvent a process or get a way with minimal loss or damage. On the other hand, Money has a strong buy-in and buy-out impact in that it elevates the level of personal satisfaction notwithstanding the longer term fading effect. Money losses its value with time and so does the money based motivation techniques. 3)How can you put a price tag on performance?†¢In financial terms, No! However, performance is measured in productivity of an individual. If the individual is satisfied with the job responsibilities and is being appreciated (both soft and hard), the performance is priced and reflected by commitment to work, enthusiasm, and personal ownership (not physical but psychological). 4)Do you notice an increase in performance after a money raise (bonus, financial reward)? And how long does it last?†¢Performance increase is always noticed after a financial reward. What I would like to point at is that the financial reward should be the consequence not the pre-requisite for an improved or increased performance. In my business life, I have seen many people who work and enjoy what they do with lesser amount of money, but have a great working atmosphere and very appreciative bosses. 5)From your experience, how did the concept â€Å"Money as a Motivator† develop through the past years? And where do you see it going?†¢From what I have seen in the past +15 years, money may have a tempting impact on a new employee or a new comer, but as time passes, and as people grow in hierarchy and mature on the personal level, the more motivating is the work responsibilities, assignments, business setting, atmosphere, stability of the organization, etc. and this is where the motivation is heading. In some cases, money becomes a way to walk out when an offer is made! If the business setup, setting, culture, modus operandi is not appealing, people might not want to â€Å"burn bridges† by refusing an offer, but might as well increase their expectation to a higher level that the employer might and/or will not be able to afford. 6)What are the positive/negative aspects in using money as motivator (conflicts and competition between employees)?†¢ Absolute use of money as a motivator has significant negative impact on the employee and the organization equally. The organizations operating budget will inflate with sky rocketing salary budgets and employees will be heavily dependant on monetary rewards. There will be a high employee turnover, resultant reduced productivity, resultant impact on the organization’s turnover, etc. This is a vicious cycle. †¢The basket of motivational techniques, including financial reward, is a healthy approach to the organization and the employee. Both will benefit from what each party will give to the other. Organizations will receive productivity, commitment, ownership, improvement on the part of the employee who in return will also enjoy the basket of appreciation, work atmosphere, investment in his/her professional development, etc. This is what I call a â€Å"win-win approach†. 7)Doesn’t money trivialize work and weaken sense of belonging?†¢Yes, sometimes it does. 8)Money: Motivation or Manipulation?†¢Again, the answer depends on the approach. In absolute term of motivation, money will be manipulative. 9)What is your conclusion (experience & personal opinion) about â€Å"Money as a Motivator†Ã¢â‚¬ ¢Money is one of the motivating factors, but certainly not THE motivator. There are more for people to receive from organizations than money. Let us remember that people make money not the other way around. References http://www.forexprofitingpro.com/sites/ldintino/_files/Image/MoneyGlobeOnFinger.JPGClarifying money’s role in motivating- Lynn W. Robbins University of Kentucky- Journal of Food Distribution ResearchGetting more bang for your buck- Martin Price is the director of HR Equations Ltd- employment today NOVEMBER 2005Motivating the work force (chapter ten) – McGraw -Hill/IrwinMoney not the motivator – The Herald Sun – Thursday, 08 December 2005Money can be a big demotivator- John Fisher, Managing director,

What to Do If Your Roommate Snores

When you dreamed of going to college, it almost certainly didnt include visions of trying to sleep while your roommate loudly snores only a few feet away. And when youre sharing a tiny space with someone who makes a lot of noise while they sleep, it can feel downright impossible to get any rest. Add the fact that youre likely not getting enough sleep anyway, and you have one small situation that quickly balloons into a serious problem. If your roommate snores in a way that is preventing you from getting your much-needed zzzs every night, youll need to address the situation ASAP. Doing so wisely, however, is likely to increase your chances of finding a workable solution that everyone is happy with. 1. First and Foremost, Mention It to Your Roommate If youre waking up super cranky and mad at your roommate, and they have no idea why you cant expect them to guess why youre so upset. If your roommate snores a lot, youll have to bring it up if youre ever going to move toward a solution. How you bring the topic up, however, matters a lot. Avoid angry accusations like You snore so much! or Why are you snoring like that all the time? Your roommate is not snoring on purpose and is certainly not doing so just to make you upset. Try to bring it up gently, as your roommate may not even know that they snore. Did you know that you snore pretty loudly? Have you ever been told that you snore a bit? Have you ever talked to anyone about your snoring? 2. Remember That Snoring Can Indicate Some Other Issues Dont just view snoring as a bad habit; it can be a medical issue for some people, too. The multiple causes of snoring should help you keep in mind that this isnt something that can just be fixed, like a dirty roommate or one who takes your stuff all of the time. Be patient and considerate as your roommate looks into  whats causing the snoring. 3. Find Some Temporary Fixes   As you and your roommate work to find long(er)-term solutions to the snoring problem, look into some short-term fixes. Can you get earplugs? Ask your roommate to try to sleep on their side? Reconfigure the room so your beds arent so close? Perhaps you can ask your roommate to avoid alcohol before bed, or look into getting and using a white noise machine, 4. Look Into Long(er)-Term Fixes Your roommate might just need to change some sleeping habits; similarly, they might also have some serious medical concerns that arent going to fixed quite so easily. If thats the case, look into some longer-term fixes. Know that its perfectly okay for one of those fixes to be finding another roommate. Sleep is important — for  both  of you. If your roommate has something serious going on that is preventing you from getting some sleep, dont hesitate to talk to your RA or other residence hall staff member about possibly switching roommates. It doesnt have to mean anyone is doing anything wrong; it just means that you arent a great match for each other. You can still be a great match for someone else. 5. Keep Things Pleasant and Friendly Consider how youd want to be treated if you were in your roommates shoes. Would you want someone, for example, taking video of your snoring and posting it online somewhere? Definitely not. Would you want your roommate to be gossiping with friends about how horrible you are to share a room with? No thanks. Your roommates snoring isnt an intentional act designed to make your life horrible. Consequently, aim for understanding and patience as you both work to find a solution. It might take a while, but theres no reason why both of you cant be kind, respectful adults during the process.