Business StudiesCBSE Class 12 · Directing

Motivation: Maslow's Need Hierarchy and Incentives (Class 12)

Updated 15 October 2026 · Fact-checked

Motivation is the process of stimulating people to act to accomplish desired goals. Maslow's hierarchy ranks five needs: physiological, safety, affiliation, esteem and self-actualisation; a satisfied need no longer motivates, so the next higher need does. Managers motivate through financial incentives (pay, bonus, profit sharing, stock options) and non-financial incentives (status, recognition, job enrichment, security).

Climb from the bottom: once a need is satisfied it stops motivating, so the next higher need takes over; match each level to its workplace incentive.

Illustration drawn for QuestionBuddy.

Understand Motivation: Maslow's Hierarchy and Incentives

Three terms.

Motive: an inner state that energises, activates and directs behaviour towards goals; motives arise from needs (hunger, security, recognition).
Motivation: the process of stimulating people to action to accomplish desired goals; it depends on satisfying people's needs.
Motivator: the technique used to motivate people, such as pay, bonus, promotion or recognition.

Features. Motivation is an internal feeling; it produces goal-directed behaviour; it can be positive (pay rise, promotion, recognition) or negative (punishment, stopping increments); it is a complex process, because people differ in expectations, perceptions and reactions.

Importance. It improves performance of employees and the organisation; changes negative or indifferent attitudes into positive ones; reduces employee turnover (saving the cost of new recruitment and training); reduces absenteeism; and helps managers introduce changes smoothly without resistance.

Maslow's Need Hierarchy (1943). Five needs, from the bottom:

Level	Need	Meaning	Organisational example
1	Basic physiological	Hunger, thirst, shelter, sleep	Basic salary
2	Safety/security	Protection from physical and emotional harm	Job security, stability of income, pension plans
3	Affiliation/belonging	Affection, acceptance, friendship	Cordial relations with colleagues
4	Esteem	Self-respect, autonomy, status, recognition, attention	Job title, status, recognition
5	Self-actualisation	Drive to become what one is capable of becoming: growth, self-fulfilment	Achievement of goals, challenging work

Diagram checklist (pyramid). Draw a triangle with five layers; label from the base: physiological, safety, affiliation, esteem, self-actualisation (apex). An arrow pointing up the side labelled 'higher-order needs'. Optional second column with workplace examples.

Four assumptions. (i) People's behaviour is based on their needs. (ii) Needs are in a hierarchical order, from basic to higher. (iii) A satisfied need can no longer motivate; only the next higher need can. (iv) A person moves to the next level only when the lower need is satisfied. The theory is criticised for its classification and strict order, but it remains useful: managers should identify an employee's need level and offer the matching incentive.

Incentives are all measures used to motivate people to improve performance.

Financial incentives (direct money or measurable in money): (1) pay and allowances (basic pay, DA, increments); (2) productivity-linked wage incentives; (3) bonus (over and above wages); (4) profit sharing; (5) co-partnership/stock option (shares at a price below market price, creating a feeling of ownership); (6) retirement benefits (provident fund, pension, gratuity); (7) perquisites (car allowance, housing, medical aid, children's education).

Non-financial incentives (psychological, social, emotional satisfaction): (1) status (ranking of positions); (2) organisational climate (individual autonomy, reward orientation, consideration to employees, risk-taking); (3) career advancement opportunity (skill programmes and sound promotion policy); (4) job enrichment (variety, higher skill, autonomy, responsibility, growth); (5) employee recognition programmes (congratulating, notice-board display, awards, mementos); (6) job security (but may cause complacency); (7) employee participation (joint management committees, work committees, canteen committees); (8) employee empowerment (more autonomy and powers to subordinates).

Linking needs to incentives. Physiological: basic pay. Safety: job security, retirement benefits. Affiliation: good organisational climate, committees. Esteem: status, recognition, job title. Self-actualisation: job enrichment, empowerment, career advancement.

Motivation: Maslow's Hierarchy and Incentives: key facts

Motive, motivation, motivator: Inner state; process of stimulating action; technique used; Need → motive → behaviour.
Maslow's five needs (bottom to top): 1.Physiological
2.Safety
3.Affiliation
4.Esteem
5.Self-actualisation; Mnemonic: 'Please Stop Asking Embarrassing Stuff' (P-S-A-E-S).
Key assumption: A satisfied need no longer motivates; the next higher need does; Move up only after the lower need is satisfied.
Financial incentives (7): Pay and allowances; productivity-linked wages; bonus; profit sharing; co-partnership/stock option; retirement benefits; perquisites; Mnemonic: 'People Prefer Big Profits, Shares, Retirement, Perks'.
Non-financial incentives (8): Status; organisational climate; career advancement; job enrichment; recognition; job security; participation; empowerment; Mnemonic: 'SOCJ-RJPE': 'Some Officers Can't Just Relax; Junior People Excel'.

How to answer Motivation: Maslow's Hierarchy and Incentives questions

Motivation appears as 1-mark need identification, 3- or 4-mark cases (identify the need level or incentive, quote the line) and 6-mark questions on Maslow's theory or on incentives.

1For a need, ask what the employee lacks or wants: survival pay (physiological), stable job or pension (safety), friends and acceptance (affiliation), respect and title (esteem), growth and challenge (self-actualisation).
2For an incentive, first decide financial (money or money's worth) or non-financial (psychological, social).
3Quote the line from the case, then name the need or incentive.
4If asked 'which need is satisfied and which will motivate next', name the next level up.
5In 6-mark Maslow answers, explain all five needs with an example each and add the assumptions if marks allow.

Motivation: Maslow's Hierarchy and Incentives in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

A satisfied need no longer motivates

Suppose a delivery executive in Chennai gets a permanent job with provident fund and medical cover. For months he has been worried about losing his job. Now he keeps asking his manager to let him join the office cricket team and the Friday lunch group.

Which need has been satisfied, and which now motivates him?

Try it first, then show the solutionSolution

Permanent job and provident fund: safety/security need satisfied.
A satisfied need no longer motivates.
He now seeks friendship and acceptance: affiliation/belonging need.

Answer: His safety need has been satisfied; the affiliation (belonging) need is now motivating him, so team activities and good relations with colleagues will motivate him more than another pay rise.

Memory hook: Once your stomach is full, food stops being exciting.

Financial vs non-financial incentive

Imagine a school canteen manager who gets two offers from her employer: a ₹2,000 monthly raise, or the title of 'Head of Food Services' with authority to plan the menu.

Classify the two incentives and link each to a Maslow need.

Try it first, then show the solutionSolution

₹2,000 raise: money, so financial (pay and allowances).
Title and authority: status and empowerment, so non-financial.
The title satisfies esteem; authority to plan relates to esteem and self-actualisation.

Answer: The raise is a financial incentive (pay); the new title with authority is a non-financial incentive (status and empowerment) that satisfies esteem needs.

Memory hook: Money pays the bills; respect fills the heart.

Tricks to remember Motivation: Maslow's Hierarchy and Incentives

Short memory aids. Say each one aloud once, then use it on a question the same day.

P-S-A-E-S, bottom up
'Please Stop Asking Embarrassing Stuff': Physiological, Safety, Affiliation, Esteem, Self-actualisation.
Use it when: Order of Maslow's needs.
Salary, Security, Social, Status, Self
Each level's workplace example starts with S: Salary (physiological), Security (safety), Social relations (affiliation), Status (esteem), Self-growth (self-actualisation).
Use it when: Matching needs to workplace examples.
Money test
If the incentive can be counted in rupees, it is financial; if it feeds pride, belonging or growth, it is non-financial.
Use it when: Classifying incentives quickly.

Motivation: Maslow's Hierarchy and Incentives: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Highest-order need · 1 mark · MCQBoard level

Which is the highest need in Maslow's hierarchy?
(a) Esteem needs
(b) Affiliation needs
(c) Self-actualisation needs
(d) Safety needs

Try it first, then show the solutionSolution

The apex is the drive to become what one is capable of becoming (1 mark).

Answer: (c) Self-actualisation needs

Example 2: Assumptions of Maslow's theory · 3 marks · Short answerBoard level

State any three assumptions of Maslow's Need Hierarchy Theory. (3 marks)

Try it first, then show the solutionSolution

One mark for each assumption.

Answer: Any three: (1) People's behaviour is based on their needs; satisfying needs influences behaviour. (2) Needs are in hierarchical order, from basic to higher-level needs. (3) A satisfied need can no longer motivate; only the next higher need can. (4) A person moves to the next higher level only when the lower need is satisfied.

Example 3: Identify incentives from a case · 3 marks · Short answerHarder board level

'Neer Water Purifiers' gives its sales team 2% of the year's profits, offers its managers company shares at ₹80 when the market price is ₹110, and publishes the 'Salesperson of the Month' on the notice board. Identify the three incentives and classify each as financial or non-financial. (3 marks)

Try it first, then show the solutionSolution

'2% of the year's profits': profit sharing, financial (1 mark).
'shares at ₹80 when the market price is ₹110': co-partnership/stock option, financial (1 mark).
'Salesperson of the Month on the notice board': employee recognition, non-financial (1 mark).

Answer: (1) Profit sharing: financial. (2) Co-partnership/stock option (shares below market price): financial. (3) Employee recognition programme: non-financial.

Example 4: Need levels from a case · 4 marks · Short answerHarder board level

Asha joined 'Pixel Studio' as a designer. In her first year she was happy that the salary paid her rent and food. In the second year, she valued that her job was made permanent with a pension plan. Now she wants to be called 'Senior Designer' and to be praised in team meetings. Identify the three needs in order and the need that will motivate her after this. (4 marks)

Try it first, then show the solutionSolution

'salary paid her rent and food': physiological (1 mark).
'job was made permanent with a pension plan': safety/security (1 mark).
'called Senior Designer and to be praised': esteem (1 mark).
Affiliation is skipped in the case; after esteem, self-actualisation will motivate her (1 mark).

Answer: (1) Basic physiological need ('salary paid her rent and food'). (2) Safety/security need ('job was made permanent with a pension plan'). (3) Esteem need ('wants to be called Senior Designer and to be praised'). Next, the self-actualisation need (growth, challenging projects, achieving her full potential) will motivate her.

Example 5: Choosing the right incentive · 4 marks · Short answerHOTS / competency

Suppose the owner of a well-paying software firm notices that his senior engineers, who already earn high salaries and have secure jobs, have lost interest in their work. He plans a 10% bonus. Using Maslow's theory, evaluate his plan and suggest two better incentives. (4 marks)

Try it first, then show the solutionSolution

Physiological and safety needs are already satisfied; a satisfied need no longer motivates (1 mark).
So more money may have limited effect; their higher needs are unmet (1 mark).
Suggest job enrichment and empowerment/career advancement or recognition (2 marks).

Answer: The engineers' lower needs (salary, security) are already satisfied, and a satisfied need no longer motivates, so a bonus may not restore interest for long. Their esteem and self-actualisation needs are unmet. Better incentives: (1) job enrichment, giving more varied, challenging work with autonomy and responsibility; (2) employee empowerment or career advancement, such as leading a new product team; recognition programmes would also help esteem.

Example 6: Case study: a hotel's motivation plan · 4 marks · Case-basedHOTS / competency

'Hotel Saffron' had high staff turnover. The new HR head: (i) linked waiters' pay to the number of satisfied-guest reviews they receive; (ii) formed a canteen committee where staff decide the menu; (iii) gave long-serving chefs the freedom to design a seasonal menu on their own; (iv) introduced a gratuity scheme.
(a) Identify the incentive in each of (i) to (iv). (2 marks)
(b) Which of these satisfies the highest need in Maslow's hierarchy? (1 mark)
(c) State one way motivation will help reduce the hotel's problem. (1 mark)

Try it first, then show the solutionSolution

(a) (i) productivity-linked wage incentive; (ii) employee participation; (iii) job enrichment/empowerment; (iv) retirement benefit (½ mark each).
(b) (iii), self-actualisation (1 mark).
(c) Motivated employees stay, reducing turnover and the cost of new recruitment and training (1 mark).

Answer: (a) (i) Productivity-linked wage incentive (financial); (ii) employee participation (non-financial); (iii) job enrichment / employee empowerment (non-financial); (iv) retirement benefit, gratuity (financial). (b) (iii): designing the menu independently gives growth and self-fulfilment, the self-actualisation need. (c) Motivation reduces employee turnover: satisfied staff stay, saving the cost and effort of fresh recruitment and training.

Where students lose marks in Motivation: Maslow's Hierarchy and Incentives

The slips examiners see most often, and what to write instead.

Mistake: Writing the hierarchy in the wrong order
Affiliation and esteem are often swapped.
Wrong working
Physiological, safety, esteem, affiliation, self-actualisation.
Right working
Physiological, safety, affiliation, esteem, self-actualisation.
Do this: P-S-A-E-S.
Usually costs: 1 to 2 marks.
Mistake: Calling promotion a financial incentive
It carries a raise.
Wrong working
Promotion: financial incentive.
Right working
Promotion (career advancement): non-financial; its non-monetary aspects override.
Do this: Status beats salary in promotion.
Usually costs: 1 mark.
Mistake: Explaining needs without workplace examples
Board answers expect the organisational example.
Wrong working
Safety need: protection from harm.
Right working
Safety need: protection from harm, e.g. job security, pension plans.
Do this: Need + meaning + workplace example.
Usually costs: ½ mark per need.
Mistake: Listing retirement benefits as non-financial
They are paid later, so students think they are not money.
Wrong working
Gratuity: non-financial.
Right working
Provident fund, pension and gratuity are financial incentives.
Do this: Measurable in rupees = financial.
Usually costs: 1 mark.

Exam tips

Motivation was a 6-mark question in the 2026 board paper 66/1/1 (Q32(b)) and a 4-mark question in the 2024-25 sample paper (Q27) and the 2026-27 sample paper (Q28(B)); need levels and incentives also appear as 1-markers.
In need-level cases, the clues often come in sequence; identify each and say which need will motivate next.
Keep financial and non-financial lists separate and add a one-line explanation for each.
Staffing, Directing and Controlling together carry 20 of the 80 theory marks in 2026-27.

Practice questions on Motivation: Maslow's Hierarchy and Incentives

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
A pension plan satisfies which need in Maslow's hierarchy?
(a) Physiological
(b) Safety/security
(c) Esteem
(d) Self-actualisation
Hint
Future stability of income.
Answer
(b) Safety/security
Q2 · 1 mark · MCQBoard level
Which of these is a non-financial incentive?
(a) Bonus
(b) Perquisites
(c) Job enrichment
(d) Profit sharing
Hint
Money test.
Answer
(c) Job enrichment
Q3 · 6 marks · Long answerBoard level
Explain Maslow's Need Hierarchy Theory. (6 marks)
Hint
Five needs with examples, then assumptions.
Answer
Maslow outlined five needs in a hierarchy: (1) basic physiological needs: hunger, thirst, shelter, sleep; satisfied at work by basic salary; (2) safety/security needs: protection from physical and emotional harm; job security, stability of income, pension; (3) affiliation/belonging needs: affection, acceptance, friendship; cordial relations with colleagues; (4) esteem needs: self-respect, autonomy, status, recognition; job title; (5) self-actualisation: the drive to become what one is capable of becoming; growth, self-fulfilment, achievement of goals. Assumptions: behaviour is based on needs; needs are hierarchical; a satisfied need no longer motivates; a person moves up only when the lower need is satisfied.
Q4 · 3 marks · Short answerHarder board level
Distinguish between motive, motivation and motivator. (3 marks)
Hint
State, process, technique.
Answer
A motive is an inner state that energises, activates and directs behaviour towards goals; it arises from needs (e.g. hunger). Motivation is the process of stimulating people to act to accomplish desired goals. A motivator is the technique used to motivate people, such as pay, bonus, promotion or recognition.
Q5 · 4 marks · Short answerHarder board level
Explain any four non-financial incentives. (4 marks)
Hint
Status, climate, career, enrichment, recognition, security, participation, empowerment.
Answer
Any four: (1) Status: ranking of positions; satisfies psychological, social and esteem needs. (2) Organisational climate: autonomy, reward orientation, consideration to employees. (3) Career advancement: skill programmes and sound promotion policy; promotion works as a tonic. (4) Job enrichment: variety, higher skill, autonomy and responsibility make the job itself motivating. (5) Employee recognition: appreciation through awards, notice-board display. (6) Job security: stable future income. (7) Employee participation: involving employees in decisions through committees. (8) Employee empowerment: more autonomy and power to subordinates.
Q6 · 2 marks · Short answerHarder board level
A company gives its managers a car allowance, a rent-free flat, medical aid and payment of their children's school fees, in addition to salary. Name this incentive, state whether it is financial or non-financial, and give one reason it motivates. (2 marks)
Hint
Perks measurable in money.
Answer
Perquisites (fringe benefits), a financial incentive, since they are measurable in money (1 mark). They raise the employees' real income and living standard over and above salary, so they motivate them to stay and perform (1 mark).
Q7 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Job security is always a positive motivator.
Reason (R): When people feel they are not likely to lose their jobs, they may become complacent.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.
Hint
The negative aspect of job security.
Answer
(d) A is false but R is true: job security motivates, but it has a negative aspect, complacency.
Q8 · 3 marks · Short answerHarder board level
State any three points of importance of motivation. (3 marks)
Hint
Performance, attitude, turnover, absenteeism, change.
Answer
Any three: (1) improves performance of employees and the organisation; (2) changes negative or indifferent attitudes into positive ones; (3) reduces employee turnover, saving the cost of new recruitment and training; (4) reduces absenteeism; (5) helps introduce changes smoothly without resistance.
Q9 · 3 marks · Short answerHOTS / competency
Suppose a factory in a drought-hit area employs workers who earn barely enough for two meals a day. The manager plans to motivate them with 'Employee of the Month' certificates. Evaluate the plan using Maslow's theory. (3 marks)
Hint
Which need is still unmet?
Answer
The plan is unlikely to work. The workers' basic physiological needs are not fully satisfied, and according to Maslow a person moves to higher needs only when lower needs are met. Certificates satisfy esteem needs, which will not motivate people struggling for food. The manager should first offer financial incentives such as better pay or productivity-linked wages, and then use recognition.
Q10 · 3 marks · Short answerHOTS / competency
Two employees receive the same promotion with a ₹5,000 raise. One is delighted by the new title; the other mainly values the raise. Is promotion a financial or non-financial incentive? Explain with reference to the case. (3 marks)
Hint
Which aspect overrides?
Answer
Promotion is treated as a non-financial incentive (career advancement, status). Although it involves extra money, its non-monetary aspects, elevation, higher status and authority and a more challenging job, usually override the monetary aspect. The case shows motivation is complex: the same incentive satisfies esteem needs for one employee and mainly lower-level needs for the other, so managers should know each employee's need level.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Define motivation.Show answer
The process of stimulating people to action to accomplish desired goals.
2.Name Maslow's five needs, bottom up.Show answer
Physiological, safety, affiliation, esteem, self-actualisation.
3.Which need does basic salary satisfy?Show answer
Basic physiological need.
4.Give two financial incentives.Show answer
Any two: pay and allowances, productivity-linked wages, bonus, profit sharing, stock option, retirement benefits, perquisites.
5.What is job enrichment?Show answer
Designing jobs with more variety, higher skill, more autonomy and responsibility, and opportunity for growth.
6.Can motivation be negative?Show answer
Yes: punishment, stopping increments or threats can also induce desired action.

Motivation: Maslow's Hierarchy and Incentives: frequently asked questions

What is Maslow's Need Hierarchy Theory?

A theory that human needs form a hierarchy of five levels, physiological, safety, affiliation, esteem and self-actualisation, and that people are motivated by the next unsatisfied need once lower needs are met.

What is the difference between financial and non-financial incentives?

Financial incentives are in money or measurable in money (pay, bonus, profit sharing, stock options). Non-financial incentives give psychological, social and emotional satisfaction (status, recognition, job enrichment, empowerment).

Why does a satisfied need not motivate?

Because once a need is met, it no longer creates the restlessness that prompts action; the next higher need becomes the motivator.

Is job security financial or non-financial?

Non-financial. It gives stability about future income and work, though it can make some employees complacent.