Books have been written on the subject of diplomacy and psychology, and anyone interested in working with people should make maximum use of them. This respect and appreciation is vital, but it doesn't come easy. Listening, and I mean really listening, is vital, and it takes lots of time. All I'm trying to say is that a supervisor must take the time for this. Setting goals and then evaluating performance with respect to those goals is essential.
Motivation is different things to different people.
I believe that if you are to achieve excellence you must find the way to paying sufficient salaries. I don't believe that motivation can be bought, but I believe that good results must be paid for. Less than satisfactory performers in any group are destructive of morale and motivation and must be dealt with. However an atmosphere of suspicion is totally counterproductive. Mutual trust is an integral part of the components of job satisfaction.