Selected Company: Samsung Electronics Company
Samsung Electronics is an affiliate of Samsung Company and was established in Korea in 1969. Samsung is the largest company in Korea, and its affiliates include bio, heavy industry, construction, finance, services, electronics, etc., and its main affiliates are Samsung Electronics. Samsung Electronics became popular when it launched TVs and fans in 1970 and entered the semiconductor industry in 1983. Currently, communication and broadcasting equipment is manufactured. Major items include monitors, VCRs, TVs, mobile phones, and various home appliances. Samsung smartphones are one of the most popular mobile phones in the world. Based on smartphones and other electronic devices, it operates 207 overseas branches worldwide. Their roles include production, sales, and research activities.
Various resources to run the company effectively.
To create a successful company, the capital needs to be backed up, and operational plans and necessary resources must be recognized for effective operation. Resources for effective operation can classify into five specific categories.
- Financial resources: the most basic and essential factor in establishing a company is funding. Without funds, the company cannot be found. As a fund for start-ups, one’s property is the best, but if not, there are various ways to get it. Its methods can effectively present a company plan, find an investor, receive investment from an investor or take out a loan from a financial institution. An easy way is to borrow money from family or friends. In addition, it can be a good way if there is a government subsidy system for founders.
- Human Resources: If financial resources occupy a large proportion of the establishment, human resources can control the company’s future. Experienced employees who meet the company’s goals have to recruit to achieve the company’s goals. If an employee’s excellent performance is of great help to the company, it can provide appropriate incentives to maximize its talent. Employees’ working environment should also be maintained in good condition to satisfy them. It is also important to hire employees with good careers. Still, it is also important to keep employees working hard to achieve their goals by providing a good working environment.
- Educational resources: educational resources give fonders the knowledge they need to start a company. The founder must be well aware of the industry related to the company he wants to create. For example, founders need to understand their competitors, and they can determine the company’s goals and directions with abundant knowledge of the industry. Founders can receive educational resources from professional trade associations or local chambers of commerce.
- Physical resources: This includes facilities and equipment necessary to establish a company. No organization in society can operate properly without physical resources. For example, workplaces such as offices or equipment such as computers for information collection are some of the essential elements. Since physical resources are the most expensive in establishing a company, founders must develop and implement effective purchase plans.
- Emotional resources: Setting up and running a company can be extremely stressful for a founder. In addition, when faced with operational difficulties, it is important to get help from people around you who advise and inspire you rather than operate with individual emotional decisions. Such people can be friends, family, or professional counsellors.
Classify an economy by sectors
The activity in which people produce goods and services necessary for life is called industry. In the past, these industries were classified into three categories: primary, secondary, and tertiary industries. However, as technology advances, it is organized into five categories: primary industry, secondary industry, tertiary industry, fourth industry, and fifth industry.
- Primary Industry: The primary industry is an industry that obtains or produces necessary goods or resources using the natural environment. According to Clark’s classification, primary industries include agriculture, forestry, livestock, and fisheries. The characteristic is that it is affected by the natural environment. Moreover, As the economy develops, other industries develop (especially the productivity of the manufacturing industry), and the proportion of primary industries decreases.
- Secondary industry: It is an industry that produces new products or energy by processing natural resources or products obtained from the primary industry. It is relatively less affected by the natural environment and has products focusing on division of labor and collaboration. Representative secondary industries include mining, manufacturing, and construction. Electric power, gas and water supply also include.
- Tertiary industry: It is also called the service industry. It is an industry that provides consumers with goods produced in the primary and secondary industries and services that make people’s lives convenient. The tertiary industry has a wide range of wholesale and retail, lodging, restaurants, transportation, telecommunications, financial, educational service, etc. The service industry is considered more important in countries where the economy has developed.
- Fourth and fifth industries: These are industries created by segmenting the tertiary industry because the tertiary industry includes too vast a range. In other words, it is part of the tertiary industry. The tertiary industry is limited to commerce, finance, insurance, transportation. The concepts of the fourth and fifth industries are introduced to classify the information, medical, education, and service industries in the fourth, and the fashion, entertainment, and leisure industries the fifth industry. These are not officially confirmed concepts yet.
Samsung Electronics includes in the secondary and tertiary industries.
The Types of Business Legal Structure
Sole Proprietorship: It is a way of operating a business owned by an individual. Single ownership is generally a form taken by most small businesses. The establishment process is relatively simple and inexpensive, and an owner has absolute operational rights. On the other hand, it can be burdensome because the owner is responsible for all debts or risks alone. In addition, investors tend not to prefer investment in sole proprietary businesses.
General Partnership: It is a system of cooperation between two or more businesses to pursue profits. Simply put, it’s a partnership. Two or more enterprises agree to collaboration. Its contents include profit and loss distribution, ownership ratio, and management rights. And by formalizing the deal, a partnership is established. The advantage of this partnership is that it is easy to create and operate. And partners are each responsible for their business liabilities, and if the contract is not documented, various conflicts can arise between them.
Limited liability company: It is a company in which members participate in company management while bearing limited liability for corporate creditors. The owners and shareholders of the company are called members. It is a form that combines several characteristics of monopoly and general partnership. Members are only responsible for the agreed capital levy about the company’s debt. Therefore, a limited liability company is a system in which corporate owners can take both factors: double taxation avoidance and limited liability.
Corporations: This legal structure is the most complex form. A corporation is separated from shareholders and is an independent firm. A corporation may enter into a contract alone without shareholders’ permission. A corporation is usually an appropriate form for a large company with many employees. Corporations are more complex in operation than other structures described above. In addition, a high level of management and supervision of the board of directors is required. The types of corporations are divided into C-corps and S-corps. The two types differ in tax processing. C-corps are subject to double taxation by imposing personal income tax and corporate income tax on companies. S-corps avoid double taxation because it only pays federal income tax.
Samsung Electronics takes the form of a corporation. Within the board of directors, committees such as management committees, audit committees, and internal transactions committees are formed and operated. In addition, although it does not belong to the board of directors, there is an in-house evaluation compensation committee composed of team leaders from each department.
The Objectives of The Company and Important Business Terms (Samsung Electronics)
Samsung Electronics aims to contribute to society by providing the best quality and services based on talent and technology. To achieve their goals, five management principles have been set as the code of conduct that executives and employees must follow.
Talent First: With the belief that “a company is a person,” the company values talent and creates an environment so that they can show their abilities to their heart’s content.
Aiming for the best worldwide: Executives and employees do their best to be the best in the world in all fields with constant passion and challenge.
Leading Change: Quickly practice change innovation with a sense of crisis that it cannot survive unless it changes according to social trends.
Management in the right direction: Always pursue the right direction in management. It is based on proper behavior, which does not violate the law and performs work.
Pursuing win-win relationship: Always contributes to the development of local communities and countries by doing all tasks with the mind of helping each other.
Stakeholders of Samsung Electronics
Samsung Electronics aims to consistently communicate with stakeholders through various channels to collect opinions from stakeholders. Representative major stakeholders include customers, global stakeholders, labor-management councils, government agencies, and suppliers. Samsung Electronics shares the economic, environmental, and social values of the company with stakeholders for balanced growth.
- Customers: Customers, one of the main stakeholders, present their opinions through various channels. Accordingly, the company collects ideas and prepares a solution. Representatively, the company tries to improve the quality of products and strengthen their competitiveness, and expand customer communication methods. Representative communication methods include customer visits, websites, and technical seminars for local customers.
- Global Stakeholders: Samsung Electronics often holds IR roadshows for international investors in various regions worldwide to share sustainable management plans with Q&A time. The opinions of investors collected at the roadshow are reflected in the sustainable management plan. In addition to roadshows, various channels are continuously being developed for smooth communication with foreign investors.
- Employees: In 42 workplaces around the world, executives and employees create and operate labor-management conferences by the laws of the country. The labor-management conferences hold regular meetings to discuss improving the working conditions of executives and employees, such as wages and welfare benefits. The results and contents of the consultation will be disclosed to all executives and employees.
- Government Agencies: They require companies to respond appropriately and actively participate in public policies and also require transparent operation and management of companies. Communication methods between the government and businesses include participation in government projects, cooperation programs, and meetings.
- Suppliers: What suppliers demand from Samsung Electronics is mainly related to shared growth. They hope to grow together through exchanges with Samsung Electronics and create and implement related shared growth programs. Communication channels include establishing a portal system shared with suppliers, holding regular meetings with suppliers, and CEO visiting suppliers regularly.
- Local communities: Samsung Electronics provides satisfaction to the local communities by carrying out ongoing regional contribution programs and contributes to the local communities through donation and scholarship systems. Samsung Electronics regularly holds community meetings and tries to communicate with local communities by creating a win-win committee.
Assets
Assets refer to tangible and intangible possessions owned by a company. Assets are largely divided into current and fixed assets. Existing assets refer to assets that can be cashed in within a year. Fixed assets refer to assets held by a company for a long period, such as real estate, equipment, and facilities. Current assets are divided into quick assets and inventory assets. Fixed assets are divided into investment assets, tangible assets, and intangible assets.
Assets
| Current assets | Fixed assets | |||
| Quick assets | Inventory assets | Investment assets | Tangible assets | Intangible assets |
| It refers to an asset that can be cashed quickly and is the asset with the highest cashability. Typically, cash, deposits, current loans, outstanding loans, etc. are included in current assets. | It refers to assets that can be cashed in through the sales process. It Includes all products produced for sales purposes. | It is an asset held for the purpose of earning investment profits over a long period of time, not for a company’s sales or business activities. | It refers to assets used regularly in corporate activities. They have specific forms. For example, land, buildings, ships, transportation facilities, etc. are included. | It is a concept that contrasts with tangible assets. There is no physical form, but they are assets that can expect the future. They include business rights, mining, and fishing rights. |
In other words, the type of asset is determined according to the use of the fund.
Equity
If you classify equity into smaller categories, it can be divided into capital, capital surplus, and retained earnings.
Equity
| Capital Stock | Capital surplus (Additional paid-in capital) | Retained earnings |
| Although it may vary depending on the type of company, it usually refers to the amount invested by the company’s investor. In the case of an individual company, it means the number of net properties of the company owner, and in the case of a partnership company, it received an investment. In the case of a corporation, it refers to the total amount of issued stocks. | It refers to a surplus arising from capital transactions other than its main business profits. The capital surplus cannot be used for any purpose other than capitalization or disposal of deficits. A representative example of the capital surplus is the capital excess stated value. | It refers to net profits obtained after subtracting all expenditures from business activities. It refers to the amount remaining in the company except for income outflow. |
Liabilities
The liability refers to the obligation to provide assets to other individuals or companies in the future due to transactions or business activities. In other words, it means to owe a specific person or company. However, the meaning of liability in accounting covers a wider area. In accounting, liabilities include not only money but also goods and services. Liabilities can be largely divided into current liabilities and fixed liabilities.
| Current liabilities | The debtor has to repay within a year are called current liabilities. Companies must always possess more current assets than current liabilities because they have to pay them back within a short period. |
| Fixed liabilities | It is a concept that contrasts with current liabilities. It refers to a debt maturity of more than a year. It is also called long-term liability due to the period. |
Assets, equity, and liabilities described above are the most important statistics showing the current financial circumstance of the company. A company’s assets include all property, such as land, buildings, goods, and machines for making goods owned by the company. Equity and liabilities show how the company obtained these assets. For example, if a company purchased land with its money, it would have increased its assets with equity. On the contrary, if the company borrowed money from a bank and purchased land, the company would have increased its assets with liabilities. As a result, the company’s assets include liabilities and equity, so the company’s assets are like adding liabilities to equity.
What is a budget?
In a commonly used sense, a budget means that a state or local government has made plans for revenue and expenditure for a certain period. However, a budget in a broad sense means a systematic plan for the income and expense of a specific organization. Certain organizations can be diverse, including individuals, families, companies, and governments.
Business budget
It is called the business budget that a company expresses its management goals or plans for a specific period in financial figures in the future. Most companies usually use short-term management plans that set the period within one year as the planned period. Business budgets differ in purpose from the types of budgets adopted by the state or public organizations. The goal of the business budget is not to control the expenditure of a company but to achieve the objectives set by the company and manage business activities.
The roles of business budget
When a company sets a comprehensive goal, the business budget sets a budget for the area of management activities to achieve this goal and presents the direction of the activity. In other words, it determines the direction to be operated to achieve the goals set by the company. In addition, for the activities to achieve the purpose to be successful, it is important to harmonize the departments that have been assigned roles. In this situation, the business budget plays a role in integrating departments to prevent conflicts between departments through budgeting.
Types of business budget
Capital budgeting: It is a planning process related to investment decisions in which profits from a company’s investment will be realized over a long period of one year or more. Capital budgeting includes land, buildings, production facilities, market research, and R&D.
Operating budget: refers to the budget involved in the activities of companies. Sales, advertising, production, product storage, wages, material, and indirect costs are included.
Financial budget: It is a budget that plans to keep a company’s management activities safe from a financial perspective.
The ways of finance a start-up business
There are three main ways to finance a business. The first is to start the company with the founder’s property, the second is to raise business funds by taking out loans, and the last is to receive investment from investors. In addition, each way is subdivided into several methods.
- One’s own seed money: The founder’s seed money is not a way to borrow money or receive investment but to raise funds with one’s property or the co-founders’ property. As an advantage, it can start without debt and generate high profits in future profit allocation. On the other hand, the disadvantage is small because it is an individual’s capital.
- Start-up Support Program: Government agencies, local governments, and private institutions operate various start-up support programs. Since these programs are in the form of support, they have the advantage of not having to repay the supported amount. On the other hand, there is a certain percentage of self-payments. In addition, each organization has different support standards, and amounts, so careful review is required.
- Crowdfunding: This is a way you receive investment from individually formed groups to finance your business. There are ways to support start-ups and ways to help operating capital for existing businesses. Most crowdfunding takes place through online platforms. There are many ways to compensate for support. Compensation methods include loan type, securities type, donation type, and sponsorship type. The advantage of crowdfunding is that there are no special conditions for funding, so you can freely apply for it on the online platform. Moreover, it can also lead to advertising effects. The disadvantage is that, unlike other methods, it is in the form of receiving investment from an unspecified number of people, which can become complicated in the later compensation process. And compared to other methods, it takes a lot of time.
- Loans from financial institutions: It is one of the representative business financing methods. The advantage is that there are various options for loan types. However, it may be difficult for new founders to meet the qualifications for loans. In other words, it is not easy for individual founders to borrow business funds from the public financial institutions because respective founders cannot generate large profits like enterprises of middle standing that generate large profits and are reliable in repayment.
In addition to these methods, there are many ways to finance the business. All new founders have to make effective plans and choose how to adopt them.
Task 2
The Economy and Diseconomy of Scale
What is an economy and diseconomy of scale?
An economy of scale refers to a case where production costs such as labor and capital costs decrease as a company’s production scale increases. In other words, it means that the cost of producing a product gradually decreases and the production increases, resulting in a maximized profit. The reasons for the emergence of economies of scale in companies include increased production facilities, reduced fares and production costs due to mass purchase and specialization of production factors due to division of labor.
A diseconomy of scale refers to a case where production costs gradually increase as the size of a company’s production facilities increases, and losses are incurred as corporate profits decrease progressively. It is also called diminishing returns to scale. Since economies of scale have limitations in the level of profit, an excessive scale can lead to increased management costs and confusion in decision-making, leading to the diseconomy of scale.
In general, as a company’s production increases, production costs also increase. For example, when a company increases production by ten times, production costs may also increase by ten times, by less than ten times, or by more than ten times. In this situation, when production costs increase less than ten times, it is called the economies of scale, and when production costs increase more than ten times, it is called the diseconomy of scale.
When these concepts are explained in other economics terms, they are also called returns to scale. The concepts of returns to scale are divided into three categories: increasing returns, constant returns, and decreasing returns. Increasing returns to scale is a case where the increase in production is greater than that of input of all production factors. Adam Smith argued for division of labor and specialization as the factors that enable increasing returns to scale.
Constant returns to scale refer to the increase in production at the same rate when the factors input to production is increased. As a result, there is no additional profit or loss to the company because the increase in production and production cost is the same.
Decreasing returns to scale is less than double when the input of all factors of production is doubled. Alfred Marshall argued that among industries, there could be decreasing returns to scale, especially in fisheries. He said that excessive fishing leads to a decrease in fish, so the catch is bound to decrease.
These concepts can be graphically represented to help easier understanding. The graph below is called the long-run average cost curve that represents economies and diseconomies of scale.
Factors affecting the selection of a business place
When a founder prepares the first place of business or plans to expand to another area, some factors influencing the selection of a place of business should be considered.
1. Accessibility
One of the most basic and important factors in selecting a business site is accessibility. In particular, it is important to consider surrounding roads and easy-to-access transportation networks. Since the market price of real estate is higher in population density and more expensive in commercialized areas, it is better to find a cheaper and wider space in the suburbs unless transportation occupies an important part due to the nature of the project. Conversely, due to the nature of the business, customers or company-related people frequently visit. In addition, if transportation occupies an important part of the business, the business site should be selected in consideration of the transportation networks. Finally, the conditions of company employees must also be considered.
2. Security
For any type of business, security is very important, externally or internally. If the crime rate is high where the founder selects a business site, quite a lot of money must be invested for security. In addition, it would be even more fatal if it was a job that had to greet customers. It is because areas with high crime rates are not preferred by customers. For this reason, being aware of the risk of potential criminal activity when selecting a business site can help determine a good location.
3. Competition
Proximity to other competitors can be harmful or surprisingly beneficial. In selecting a business site, you can make a good decision by identifying what competitors are nearby and their business strategies. If the competition is too severe or the customer’s preference for the competitor is high, it is recommended to reconsider selecting a business location. However, if you are confident that you can satisfy your customers with your innovative business strategy, it is also important to secure customers faster in a position full of competitors.
4. Business rate
When selecting a business site, the average cost of rent, utility bills, taxes, etc., in the area should be investigated and considered before selection. It is because it is a good location as a business place, but if these costs are high, it can affect business operation.
5. Survey of the region
Investigating the area includes the employment rate and the proportion of business-related workers. Since employees are the most important resource in the business, choosing a place that lacks the necessary talent can be a shortcut to failure.
6. Potential for growth
Before selecting a business site, it is important to consider the period to stay there. When planning to stay for a short period, it is necessary to investigate whether it is possible to generate sufficient profits even within a short period. In preparation for the period of stay, the business site should be selected in anticipation of profits.
Each business has a different preferred location, but selecting a location considering these important factors is something that all companies should keep in mind.
The Efficiency and Effectiveness of Samsung Electronics’ Production Process
Recently, Samsung Electronics has been seeking ways to efficiently use resources and use discarded products as resources again through technological innovation in product development and production. Samsung Electronics aims for a circular economy by introducing an eco-friendly method in the production process. According to Samsung Electronics, in 2019, it succeeded in re-resource 95% of its business waste in Korea.
To protect the environment and use resources more efficiently, Samsung Electronics is operating a new concept, circular economy, as the basis for the production process. Even after the product is used, efforts are being made to reduce resource usage by collecting and recycling materials from consumers and minimizing the materials and types used.
Principles of circular economy
- Minimize the use of resources by using recyclable materials in raw material selection and product design.
- It contributes to consumers’ long-term use of the product by testing its performance and improving durability.
- By reducing the packaging size of the product, supports an efficient transportation process and minimizes the use of raw materials.
- The reuse of waste generated during the manufacturing process encourages minimizing the use of new resources.
- It provides the best after-sales service to systematically manage consumers’ products to extend the product’s life and contribute to customer satisfaction.
Effect of motivation and workforce planning on labor turnover
What is motivation in business?
Motivation is the creation of motive or desire to do something and refers to the power of a person to achieve a goal. Motivation also has a huge impact on productivity because it controls people’s efficiency. It is also an important task for companies to motivate employees effectively because the overall productivity of the organization is poor if employees in the company are less likely to have morale and have no strong motivation. Since motivation is a kind of human emotion, each person has different standards. Still, if the company effectively motivates its employees, work productivity will increase, and employees will feel a sense of accomplishment. For a company to motivate its employees effectively, it must manage both internal motives resulting from a sense of accomplishment for its actions and external motives that provide incentives for work. For these things, companies must establish appropriate systems and cultures.
Causes and effects of loss of motivation for work
One of the reasons employees lose their motivation for work maybe when they do their best but feel that they have not achieved good results or have not received as much compensation as they try. They may lose their motivation for work. Another reason is that excessive work or work beyond employees’ capabilities may also cause loss of motivation. In addition, excessive involvement of supervisors is also a cause of morale reduction. It is effective to help with appropriate involvement because excessive involvement of supervisors can lower employees’ responsibility for their work and lower their desire for achievement.
Loss of motivation for work negatively affects both employees and companies.
As explained above, the loss of employee motivation for work lowers work efficiency and leads to a decrease in the company’s productivity. In addition, employees who lose motivation may also affect their colleagues around them and spread throughout the organization. In other words, companies should pay attention because it can establish itself as a negative culture among employees. Since this corporate culture lowers employees’ sense of duty, excellent talent may change jobs. If employees, the company’s most important resource, change jobs, this could lead to huge losses. Therefore, companies require careful attention to prevent this situation.
Employees who have lost their motivation for work are difficult to produce good results in all tasks. In addition, if the work process is reflected in the evaluation, it is difficult to expect a positive review in the work process even if good results are produced. If this condition persists, not only can it be difficult to learn new tasks, but it can also come as a big burden. If it is difficult to find an appropriate motivation within the company, employees should first try to escape through motivation on their own.
As a result, the company should create an environment in which the company can move toward its goals by preventing the turnover of excellent talent and increasing work efficiency through effective motivation management of employees.
Workforce planning
Workforce planning is a strategic process used by companies to predict the need for labor and effectively distribute workers. Several organizations, including businesses, non-profit organizations, and government agencies, use workforce planning to achieve each organization’s goals, such as productivity, efficiency, and revenue, most efficiently. Workforce planning can be divided into two types: operational workforce planning and strategic workforce planning. Operational workforce planning is carried out by individuals, which allows managers to plan work schedules to maintain corporate productivity and continuity. In addition, the role of operational work planning includes distributing personnel among departments and identifying the number of departments and employees required to perform different tasks. In summary, operational workforce planning enables the optimal operation of the company by allocating appropriate human resources within the company and planning effective work schedules. Strategic workforce planning deals with issues that cover all aspects of the company. For example, it includes predicting knowledge outflow due to labor turnover, predicting workforce needed in the future, and establishing an efficient workforce analysis strategy.
Motivation theory is a theory that explains the factors that induce motivation and the process of motivation. Motivation theory is classified into content theories, process theories, and reinforcement theories.
1. The content theory is a theory that focuses on the factors that motivate action. It mainly explains what needs individuals in the organization have, how they meet them, and what motivational factors are. Representative examples of content theory include Maslow’s hierarchy of needs, Herzberg’s two-factor theory, and C.P. Alderfer’s ERG theory.
Maslow’s Theory
Human needs vary from person to person and are endless. Maslow’s hierarchy of needs is to classify human needs into five stages and explain the concept. This theory explains that all humans are born with five needs, which can be divided into phases.
The first stage presented in this theory is physiological needs. The most basic elements of human life, such as eating, sleeping, and dressing, are included. All of the most common and essential human life is contained.
The second stage is safety needs. As one of the human instincts, it is a desire to be physically and mentally protected from the dangers existing around it.
The third stage is the desire to love someone, to belong to or create a particular group, and is called the desire to love and belong.
The fourth stage is esteem needs. Mainly, reputation and desire for power are included in this stage. It is a desire to be famous and to be recognized by others. The desire that occupies the largest proportion is human self-esteem, which contains competence, mastery, confidence, and independence.
The final stage is self-actualization needs. Maslow claimed that this stage is the highest level of desire. He explained that the self-realization desire, which can only be achieved by meeting the needs of all steps up to the fourth stage, is a stage that aims for one’s development and maximizes one’s potential.
However, Maslow later insisted that the five levels of desire priority should be reversed. In other words, the desire for self-realization is the most basic human desire. As the economy becomes abundant and human creativity becomes the most important business capital, it was argued that it was more persuasive to reverse the stage.
Herzberg’s theory
Herzberg’s two-factor theory explains that human needs can be classified into motivational and hygienic factors. Motivation factors are factors that induce satisfaction with others in the organization, and hygiene factors are factors that cause dissatisfaction with members of the organization if their needs are not satisfied. However, even if they are met, they do not actively induce motivation for job performance.
C.P. Alderfer’s theory
C.P. Alderfer’s ERG theory pointed out the limitations of Maslow’s theory of needs and divided them into three stages instead of five stages. The three stages are existence needs, related needs, and growth needs.
2. Process theory is a theory that explains the process of behavior, such as changing or restarting behavior by some variable in the process of achieving the organization’s goals. Process theory is based on human needs, but it is not limited to that, but by adding factors that induce choice of action, examines how the behavior of people in the organization changes. Detailed theories representing process theory include expectancy theory and equity theory. Vroom’s expectancy theory is that motivation comes from the expectation of compensation obtained as a result. The equity theory is that people are motivated by their efforts to reduce the difference while recognizing the difference between their goals and the current situation. J. Stacy Adams was the first to present the concept of equity theory.
3. Reinforcement theory is a theory that behavior should be sustained by creating an environment that motivates behavior to prevent motivation from decreasing or disappearing. That is, reinforcement theory can explain how individuals’ specific behavior persists. According to B.F. Skinner, reinforcement theory focuses on surrounding environmental factors rather than human internal motives. In organizational activities, environmental factors affect the persistence of motivation more than internal motivation. The types of reinforcement theory can be classified into positive, negative, punishment, and extinction.
Positive reinforcement increases the frequency of desirable actions within the organization by providing results for activities such as praise or compensation if members of the organization have acted in favor of the organization.
Negative reinforcement refers to helping members perform desirable actions smoothly by eliminating obstacles that adversely affect the behavior of members of the organization.
Punishment reinforcement refers to punishing for bad actions that violate organizational principles, thereby lowering the probability of such activities. It can be confused with negative reinforcement that removes obstacles to good behavior, but the goal of punishment reinforcement is to prevent bad behavior in advance.
Extinction reinforcement refers to previous actions reinforced by receiving rewards, but now reducing the frequency of activities by eliminating rewards for such activities. For example, if an organization undertakes important tasks and requires overtime work for its members, it should pay overtime allowances to its members. Then, when the job is completed, the members do not have to work overtime, and the resulting excess allowance also disappears.
Reinforcement theory explains how an individual or group learns a particular behavior. Environmental factors motivate individuals to achieve their goals. The types of reinforcement theory described above are very important parts of achieving individual or organizational goals. Organizational managers can facilitate corporate operation by preparing effective guidelines or educational programs based on this theory.
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