YOUR LEADER IN THE CONTEXT OF MOTIVATIONAL THEORIES
8 Motivation: From Concepts to Application
Motivated to Risk it all
These days, Lee Farkas (seen here) is wearing the same outfit in every picture: a heavy cloth shirt with the bold orange stripes of a U.S. federal penitentiary. But it wasn’t long ago that Farkas wore the expensive suits of a successful mortgage banker and posed with his private jet. “It’s not a crime to have a plane,” he said. True, unless you buy the plane using $38.5 million of personally misappropriated funds. Farkas and six others are responsible for a $2.9 billion fraud that collapsed two banks and created the sixth-largest U.S. bank failure ever. He is the most senior executive incarcerated as a result of the housing bubble debacle and, with his group of co-conspirators, owes $3.5 billion in restitution. Farkas is currently serving 30 years in the same prison as the infamous Bernie Madoff, who is serving a life term for bank fraud.
The motives for Farkas’s crimes defy logic. By all accounts, he had the intelligence and savvy to live an honest rags-to-riches story: originally broke and with no experience in finance, he bought Taylor, Bean & Whitaker (TBW), a small mortgage firm, with $75,000 (he says it was $25,000) in borrowed funds and within a decade transformed it into one of the top mortgage lenders. Somehow this success wasn’t enough for him, though, so he created and sold phony mortgages, siphoning the gains into his private accounts to fund a lavish lifestyle including houses, cars, and planes. When TBW accumulated a huge deficit as a result, Farkas enlisted Colonial Bank’s Senior VP Catherine Kissick to help sell loans concurrently to multiple hedge funds and push the phony proceeds back into TBW’s accounts. Soon both firms collapsed.
Why wasn’t Farkas motivated to continue his earlier honest success? He seems to have felt he simply wasn’t making enough money. “I wasn’t the kind of guy they painted a picture of, big high-living,” he said. “Among my peer group, I was a pauper.” Farkas also felt entitled to the money he stole, for while he admits he did “things that were not really smart,” he maintains his innocence. Farkas furthermore minimizes his role, saying it is “important to understand that I was a small-town businessman . . . with no political connections or power.” Finally, he refuses to accept responsibility. District Court Judge Leonie Brinkema, who presided over the restitution ruling, commented that Farkas showed no remorse beyond sorrow over “getting caught.” Indeed, Farkas said he was disbelieving when he was arrested. “I go ‘ha ha, get away,’” he said. “Finally, they took these guns out.”
For the love of money, Farkas was willing to risk it all—even freedom for the rest of his life. If he fails to have his sentence overturned, he will not be released until he is in his 80s. Farkas feels he already lives only “vicariously” through e-mail contact with family and friends. “You’re not really alive in here, you’re a zombie—just a body walking around, eating, sleeping and being yelled at,” he complained. His motive for living now is to get out. His last conviction appeal failed, and if the next one fails too, he says, “Maybe I’ll just fade away.”
Motivating by Job Design: The Job Characteristics Model
1. 1 Describe how the job characteristics model motivates by changing the work environment.
The way work is structured has a bigger impact on an individual’s motivation than might first appear. Job design suggests that the way elements in a job are organized can influence employee effort, and the job characteristics model, discussed next, can serve as a framework to identify opportunities for changes to those elements.
The Job Characteristics Model
Developed by J. Richard Hackman and Greg Oldham, the job characteristics model (JCM) describes jobs in terms of five core job dimensions: 1
1. Skill variety is the degree to which a job requires different activities using specialized skills and talents. The work of a garage owner-operator who does electrical repairs, rebuilds engines, does bodywork, and interacts with customers scores high on skill variety. The job of a body shop worker who sprays paint 8 hours a day scores low on this dimension.
2. Task identity is the degree to which a job requires completion of a whole and identifiable piece of work. A cabinetmaker who designs furniture, selects the wood, builds the objects, and finishes them has a job that scores high on task identity. A job scoring low on this dimension is operating a lathe solely to make table legs.
3. Task significance is the degree to which a job affects the lives or work of other people. The job of a nurse helping patients in a hospital intensive care unit scores high on task significance; sweeping floors in a hospital scores low.
4. Autonomy is the degree to which a job provides the worker freedom, independence, and discretion in scheduling work and determining the procedures for carrying it out. A sales manager who schedules his own work and tailors his sales approach for each customer without supervision has a highly autonomous job. An account representative who is required to follow a standardized sales script with potential customers has a job low on autonomy.
5. Feedback is the degree to which carrying out work activities generates direct and clear information about your own performance. A job with high feedback is testing and inspecting iPads. Installing components of iPads as they move down an assembly line provides low feedback.
Exhibit 8-1 presents the JCM. Note how the first three dimensions—skill variety, task identity, and task significance—combine to create meaningful work the employee will view as important, valuable, and worthwhile. Jobs with high autonomy give employees a feeling of personal responsibility for results; feedback will show them how effectively they are performing. The JCM proposes that individuals obtain internal rewards when they learn (knowledge of results in the model) that they personally have performed well (experienced responsibility) on a task they care about (experienced meaningfulness). The more these three psychological states are present, the greater will be employees’ motivation, performance, and satisfaction, and the lower their absenteeism and likelihood of leaving. As Exhibit 8-1 indicates, individuals with a high growth need are more likely to experience the critical psychological states when their jobs are enriched—and respond to them more positively.
Exhibit 1
The Job Characteristics Model
Source: J. L. Pierce, I. Jussila, and A. Cummings, “Psychological Ownership within the Job Design Context: Revision of the Job Characteristics Model,” Journal of Organizational Behavior 30, no. 4 (2009): 477–96.
Much evidence supports the JCM concept that the presence of these job characteristics generates higher job satisfaction and organizational commitment through increased motivation. 2 In general, research concurs with the theory behind the JCM, although studies have introduced potential modifiers. One study suggested that when employees were “other oriented” (concerned with the welfare of others at work), the relationship between intrinsic job characteristics and job satisfaction was weaker, 3 meaning that our job satisfaction comes less from these characteristics when we care about others. Another study proposed that the degree of psychological ownership we feel toward our work enhances our motivation, particularly if the feelings of ownership are shared among a work group. 4 Other research has explored the JCM in unique settings such as in virtual work situations, finding that if individuals work together online but not in person, their experience of meaningfulness, responsibility, and knowledge of results can suffer. Thankfully, managers can mitigate these for employees by consciously developing personal relationships with them and increasing their sense of task significance, autonomy, and feedback. 5
We can combine the core dimensions of the JCM into a single predictive index, called the motivating potential score (MPS) and calculated as follows:
MPS equals the fraction Skill variety plus Task identity plus Task Significance over 3 (end fraction) times Autonomy times Feedback
MPS=Skillvariety+Taskidentity+TaskSignificance3×Autonomy×FeedbackMPS=Skill variety + Task identity+ Task Significance3×Autonomy×Feedback
To be high on motivating potential, jobs must be high on at least one of the three factors that lead to experienced meaningfulness and high on both autonomy and feedback. If jobs score high on motivating potential, the model predicts that motivation, performance, and satisfaction will improve, while absence and turnover will be reduced. But we can better calculate motivating potential by simply adding characteristics rather than using the formula. Think about your job. Do you have the opportunity to work on different tasks, or is your day routine? Are you able to work independently, or do you constantly have a supervisor or coworker looking over your shoulder? Your answers indicate your job’s motivating potential.
A few studies have tested the JCM in different cultures, but the results aren’t consistent. The fact that the model is relatively individualistic (it considers the relationship between the employee and his or her work) suggests job enrichment strategies may not have the same effects in collectivistic cultures as in individualistic cultures (such as the United States). Indeed, one study in Niger found that while the MPS was highly influenced by job dimensions, the correlations were different than the general data gathered from predominately individualist countries. 6
In contrast, another study suggested the degree to which jobs had intrinsic job motivators predicted job satisfaction and job involvement equally well for U.S., Japanese, and Hungarian employees. 7
Job Redesign
1. 2 Compare the main ways jobs can be redesigned.
“Every day was the same thing,” Frank said. “Stand on that assembly line. Wait for an instrument panel to be moved into place. Unlock the mechanism and drop the panel into the Jeep Liberty as it moved by on the line. Then I plugged in the harnessing wires. I repeated that for eight hours a day. I don’t care that they were paying me 24 dollars an hour. I was going crazy. Finally, I just said this isn’t going to be the way I’m going to spend the rest of my life. My brain was turning to JELL-O. So I quit. Now I work in a print shop and I make less than 15 dollars an hour. But let me tell you, the work I do is really interesting. The job changes all the time, I’m continually learning new things, and the work really challenges me! I look forward every morning to going to work again.”
The repetitive tasks in Frank’s job at the Jeep plant provided little variety, autonomy, or motivation. In contrast, his job in the print shop is challenging and stimulating. From an organizational perspective, the failure of Frank’s first employer to redesign his job into a more satisfying one led to increased turnover. Redesigning jobs therefore has important practical implications—reduced turnover and increased job satisfaction among them. Let’s look at some ways to put the JCM into practice to make jobs more motivating.
Job Rotation
If employees suffer from over-routinization of their work, one alternative is job rotation , or the periodic shifting of an employee from one task to another with similar skill requirements at the same organizational level (also called cross-training). Manufacturers also use job rotation as needed to respond more flexibly to the volume of incoming orders. New managers are sometimes rotated through jobs, too, to help them get a picture of a whole organization. 8 For these reasons, job rotation can be applied in any setting where cross-training is feasible, from manufacturing floors to hospital wards. At Singapore Airlines, for instance, a ticket agent may temporarily take on the duties of a baggage handler, both to be cross-trained and get exposure to different aspects of the organization. Extensive job rotation is among the reasons Singapore Airlines is rated one of the best airlines in the world. 9
The use of job rotation has been shown to increase job satisfaction and organizational commitment. 10 Additionally, international evidence from Italy, Britain, and Turkey shows that job rotation is associated with higher levels of organizational performance in manufacturing settings. 11 It reduces boredom, increases motivation, and helps employees understand how their work contributes to the organization. It may also increase safety and reduce repetitive-based work injuries, but this is currently a topic of much study and debate, with mixed findings. 12
Job rotation does have drawbacks. Work that is done repeatedly may become habitual and routine, which makes decision making more automatic and efficient, but less thoughtfully considered. Second, training costs increase when each rotation necessitates a round of training. Third, moving a worker into a new position reduces overall productivity for that role. Fourth, job rotation creates disruptions when members of the work group have to adjust to new employees. Finally, supervisors may have to spend more time answering questions and monitoring the work of recently rotated employees.
MYTH OR SCIENCE?
Money Can’t Buy Happiness
Along with this clichéd statement, you’ve probably heard that money does buy happiness. Both may be true. Economist Richard Easterlin argued that once basic financial needs have been met, more money doesn’t really do much to make a person happy. Researchers set the limit at around $75,000, recently prompting one CEO to give away all his earnings above that amount to his employees!
This is by no means the last word, nor a directive to be unhappy until you make $75,000 and no happier afterward. More recent research worldwide indicates the exact opposite: The more money, the better. The authors said, “If there is a satiation point, we are yet to reach it.”
Given these mixed findings, the relationship between happiness and income is probably not direct. In fact, other research suggests your level of income is less important than how you spend it. Think about why you may be motivated by money. Do you envision the number of zeroes in your bank account increasing? Probably not. You’re probably more motivated by what you can buy with the money than by the money itself. From research, we know:
· Giving money away makes people happier than spending it on themselves. In one study, students were given money and told to either give it away or spend it on themselves. Then the study asked people to give away their own money. Either way, people were happier giving away the money, even if the givers were relatively poor. What seems to matter is not the amount, but how much impact you think your donation will have on others.
· People are happier when they spend money on experiences rather than products. Research professor Thomas Gilovich says we think to ourselves, “I have a limited amount of money, and I can either go there, or I can have this. If I go there, it’ll be great, but it’ll be over in no time. If I buy this thing, at least I’ll always have it. That is factually true, but not psychologically true. We adapt to our material goods.”
· People are happier when they buy time . . . but only if they use it well. Outsource tasks when you can, for instance, and “think of it as ‘windfall time’ and use it to do something good,” says researcher Elizabeth Dunn.
Saying that money brings more happiness when spent on our experiences (and the time to do them) may seem counterintuitive until we think about it closely. What did you think of your cell phone when you bought it compared to what you think of it now? Chances are you were interested and engaged when you bought it, but now it is an everyday object. For experiences, what did you think of your greatest vacation when you were on it, and what do you think of it now? Both the experience at the time and the recollection now may bring a smile to your face.
Sources: A. Blackman, “Can Money Buy Happiness?” The Wall Street Journal, November 10, 2014, R1, R2; D. Kurtzleben, “Finally: Proof That Money Buys Happiness (Sort Of),” USNews.com, April 29, 2013; and A. Novotney, “Money Can’t Buy Happiness,” Monitor on Psychology (July/August 2012): 24–26.
Relational Job Design
While redesigning jobs on the basis of job characteristics theory is likely to make work more intrinsically motivating, research is focusing on how to make jobs more prosocially motivating to people. In other words, how can managers design work so employees are motivated to promote the well-being of the organization’s beneficiaries (customers, clients, patients, and employees)? This view, relational job design , shifts the spotlight from the employee to those whose lives are affected by the job that employee performs. 13 It also motivates individuals toward increased job performance. 14
One way to make jobs more prosocially motivating is to better connect employees with the beneficiaries of their work by relating stories from customers who have found the company’s products or services to be helpful. For example, the medical device manufacturer Medtronic invites people to describe how its products have improved, or even saved, their lives and shares these stories with employees during annual meetings, providing the employees a powerful reminder of the impact of their work. For another example, researchers found that when university fundraisers briefly interacted with the undergraduates who would receive the scholarship money they raised, they persisted 42 percent longer than and raised nearly twice as much money as those who didn’t interact with potential recipients. 15 The positive impact was apparent even when fundraisers met with just a single scholarship recipient.
Medical device maker Stryker provides opportunities for its employees to connect with people affected by their work. Shown here are its employees with endurance athlete Daren Wendell (center, in hat), who has an implanted titanium rod in his leg that Stryker produced.
Source: Diane Bondareff/Invsion for Stryker/AP Images
Personal contact with beneficiaries may not always be necessary. One study found that radiologists who saw photographs of patients whose scans they were examining made more accurate diagnoses of their medical problems. Why? Seeing the photos made it more personal, which elicited feelings of empathy in the radiologists. 16
Why do these connections have such positive consequences? Meeting beneficiaries firsthand—or even just seeing pictures of them—allows employees to see that their actions affect a real person and have tangible consequences. It makes customers or clients more memorable and emotionally vivid, which leads employees to consider the effects of their work actions more. Finally, connections allow employees to easily take the perspective of beneficiaries, which fosters higher levels of commitment.
You might be wondering whether connecting employees with the beneficiaries of their work is already covered by the idea of task significance in job characteristics theory. However, some differences make beneficiary contact unique. For one, many jobs might be perceived to be high in significance, yet employees in those jobs never meet the individuals affected by their work. Second, beneficiary contact seems to have a distinct relationship with prosocial behaviors such as helping others. For example, one study found that lifeguards who read stories about how their actions benefited swimmers were rated as more helpful by their bosses; this was not the case for lifeguards who read stories about the personal benefits of their work for themselves. 17 The upshot? There are many ways you can design jobs to be more motivating, and your choice should depend on the outcomes you’d like to achieve.
Relational job design, with its focus on prosocial motivation, is an especially salient topic for organizations with corporate social responsibility (CSR) initiatives. As we discussed in earlier chapters, CSR efforts often include invitations for employees to volunteer their time and effort, sometimes using the skills they gained on the job (like Home Depot employees when they help rebuild homes) but often not (such as when bank employees help rebuild homes with groups like Habitat for Humanity). In both cases, the employees may be able to interact with the beneficiaries of their efforts, and research indicates that corporate-sponsored volunteer programs enhanced in the JCM dimensions of meaningfulness and task significance motivate employees to volunteer. 18 But while this motivation for prosocial behavior is noteworthy, it is not the same as relational job design: for one, the CSR efforts are through volunteering (not on-the-job); and for another, the work they are providing is not usually the same work they do at their jobs (Home Depot workers do not build homes on the job). However, relational job design holds intriguing possibilities for CSR initiatives.
Alternative Work Arrangements
1. 3 Explain how specific alternative work arrangements can motivate employees.
As you surely know, there are many approaches toward motivating people, and we’ve discussed some of them. Another approach to motivation is to consider alternative work arrangements such as flextime, job sharing, and telecommuting. These are likely to be especially important for a diverse workforce of dual-earner couples, single parents, and employees caring for a sick or aging relative.
Flextime
Susan is the classic “morning person.” Every day she rises at 5:00 a.m. sharp, full of energy. However, as she puts it, “I’m usually ready for bed right after the 7:00 p.m. news.”
Susan’s work schedule as a claims processor at The Hartford Financial Services Group is flexible. Her office opens at 6:00 a.m. and closes at 7:00 p.m., and she schedules her 8-hour day within this 13-hour period. Because she is a morning person whose 7-year-old son gets out of school at 3:00 p.m. every day, Susan opts to work from 6:00 a.m. to 3:00 p.m. “My work hours are perfect. I’m at the job when I’m mentally most alert, and I can be home to take care of my son after he gets out of school.”
Susan’s schedule is an example of flextime , short for “flexible work time.” Flextime employees must work a specific number of hours per week but may vary their hours of work within limits. As in Exhibit 8-2 , each day consists of a common core, usually 6 hours, with a flexibility band surrounding it. The core may be 9:00 a.m. to 3:00 p.m., with the office actually opening at 6:00 a.m. and closing at 6:00 p.m. Employees must be at their jobs during the common core period, but they may accumulate their other 2 hours around that. Some flextime programs allow employees to accumulate extra hours and turn them into days off.
Flextime has become extremely popular. According to a recent survey, a majority (60 percent) of U.S. organizations offer some form of flextime. 19 This is not just a U.S. phenomenon, though. In Germany, for instance, 73 percent of businesses offer flextime, and such practices are becoming more widespread in Japan as well. 20 In Germany, Belgium, the Netherlands, and France, by law employers are not allowed to refuse an employee’s request for either a part-time or a flexible work schedule as long as the request is reasonable, such as to care for an infant child. 21
Claimed benefits of flextime include reduced absenteeism, increased productivity, reduced overtime expenses, reduced hostility toward management, reduced traffic congestion, 22 elimination of tardiness, and increased autonomy and responsibility for employees—any of which may increase employee job satisfaction. 23 But what is flextime’s actual record?
Most of the evidence stacks up favorably. Perhaps most important from the organization’s perspective, flextime increases profitability. Interestingly, though, this effect seems to occur only when flextime is promoted as a work–life balance strategy (not when it is for the organization’s gain). 24 Flextime also tends to reduce absenteeism, 25 probably for several reasons. Employees can schedule their work hours to align with personal demands, reducing tardiness and absences, and they can work when they are most productive. Flextime can also help employees balance work and family lives; it is a popular criterion for judging how “family friendly” a workplace is.
Flextime’s major drawback is that it’s not applicable to every job or every worker. It works well for clerical tasks when an employee’s interaction with people outside the department is limited, but it is not a viable option for receptionists or salespeople in retail stores—anyone whose service job requires being at a workstation at predetermined times. It also appears that people who have a strong desire to separate their work and family lives are less apt to want flextime, so it’s not a motivator for everyone. 26 Those who ask for it are often stigmatized, which can be avoided only if the majority of the organization’s leaders adopt flexible hours to signal that flextime is acceptable. 27 And finally, research in the United Kingdom indicated that employees in organizations with flextime do not realize a reduction in their levels of stress, suggesting that this option may not truly improve work–life balance. 28 Since flextime is intuitively a worthwhile business practice, these findings suggest additional research is needed to determine the motivational aspects of flextime.
Exhibit 2
Possible Flextime Staff Schedules
Job Sharing
Job sharing allows two or more individuals to split a traditional full-time job. One employee might perform the job from 8:00 a.m. to noon, perhaps, and the other from 1:00 p.m. to 5:00 p.m., or the two could work full but alternate days. For example, top Ford engineers Julie Levine and Julie Rocco engaged in a job-sharing program that allowed both of them to spend time with their families while redesigning the Explorer crossover. Typically, one of them would work late afternoons and evenings while the other worked mornings. They both agreed that the program worked well, although making it feasible required a great deal of time and preparation. 29
Only 18 percent of U.S. organizations offered job sharing in 2014, a 29 percent decrease since 2008. 30 Reasons it is not more widely adopted include the difficulty of finding compatible partners to job share and the historically negative perceptions of individuals not completely committed to their jobs and employers. However, eliminating job sharing for these reasons might be short-sighted. Job sharing allows an organization to draw on the talents of more than one individual for a given job. It opens the opportunity to acquire skilled workers—for instance, parents with young children and retirees—who might not be available on a full-time basis. From the employee’s perspective, job sharing can increase motivation and satisfaction.
An employer’s decision to use job sharing is often based on economics and national policy. Two part-time employees sharing a job can be less expensive in terms of salary and benefits than one full-timer, but experts suggest this is not often the case because training, coordination, and administrative costs can be high. On the other hand, in the United States the Affordable Care Act may create a financial incentive for companies to increase job-sharing arrangements in order to avoid the requirement to provide health care to full-time employees. 31 Many German and Japanese 32 firms have been using job sharing—but for a very different reason. Germany’s Kurzarbeit program, which is now close to 100 years old, kept employment levels from plummeting throughout the economic crisis by switching full-time workers to part-time job sharing work. 33
Ideally, employers should consider each employee and job separately, seeking to match the skills, personality, and needs of the employee with the tasks required for the job, taking into account that individual’s motivating factors.
Telecommuting
It might be close to the ideal job for many people: no rush hour traffic, flexible hours, freedom to dress as you please, and few interruptions. Telecommuting refers to working at home—or anywhere else the employee chooses that is outside the workplace—at least 2 days a week on a computer linked to the employer’s office. 34 (A closely related concept—working from a virtual office—describes working outside the workplace on a relatively permanent basis.) A sales manager working from home is telecommuting, but a sales manager working from her car on a business trip is not.
Telecommuting seems to mesh with the cultural transition to knowledge work (which often can be performed anywhere), and as the OB Poll on page 255 indicates, people with more education are more apt to work from home. However, telecommuting has been a popular topic lately not for its potential, but for its organizational acceptance, or lack thereof. Despite the benefits of telecommuting, large organizations such as Yahoo! and Best Buy have eliminated it. 35 Yahoo! CEO Marissa Mayer discussed how telecommuting may undermine corporate culture, noting, “People are more productive when they’re alone, but they’re more collaborative and innovative when they’re together.” 36
While the movement away from telecommuting by some companies made headlines, it appears that for most organizations, it remains popular. Almost 50 percent of managers in Germany, the United Kingdom, and the United States are permitted telecommuting options. In developing countries, this percentage is between 10 and 20 percent. 37 Organizations that actively encourage telecommuting include Amazon, IBM, American Express, 38 Intel, Cisco Systems, 39 and a number of U.S. government agencies. 40 Telecommuting is less practiced in China, but there, too, it is growing. 41
Career Objectives
How can I get flextime?
My job is great, but I can’t understand why management won’t allow flextime. After all, I often work on a laptop in the office! I could just as easily be working on the same laptop at home without interruptions from my colleagues. I know I’d be more productive. How can I convince them to let me?
— Sophia
Dear Sophia:
We can’t help but wonder two things: 1) is the ban on working from home a company policy, or your manager’s policy; and 2) do you want flextime, or telecommuting? If you work for Yahoo!, for instance, you may not be able to convince anyone to let you work from home after CEO Marissa Mayer’s very public decree against the policy. If the ban is your manager’s policy—or even your division’s policy—in an organization open to alternative work arrangements, you just may be able to get your way.
That leads us to the second question, about flextime versus telecommuting. If you want flextime as you stated and just want to work from home during some non-core hours (say, work in the office for 6 hours a day and work another 2 hours a day from home), your employer may be more likely to grant your wish than if you want to completely telecommute (work all your hours from home).
Research indicates that employees are most likely to be granted work from home privileges as a result of a direct sympathetic relationship with their managers (not as a result of a company policy). Employees are also more likely to gain acceptance for partial than for full telecommuting (either flextime or by alternating days). It helps if you have a legitimate need to be home and if you do knowledge-based work. Jared Dalton, for instance, telecommutes 2 days a week as a manager for accounting firm Ernst & Young, and his wife Christina telecommutes on 2 different days, so they can oversee the care of their infant.
If it sounds like flextime depends on favoritism, you might be right. It’s also, however, a reflection of the state of telecommuting: only 38 percent of U.S. organizations permit some of their employees to regularly work from home. To be one of the lucky few:
· Check your organization’s flexible options policies.
· Develop a plan for working from home to show your manager. Include how many hours/week, which days/week, and where you will work, and explain how your manager can retain oversight of you.
· Assemble evidence on your productivity. Have you worked from home before? If so, show how much you achieved. You stated you would be more productive at home: How much more?
· Outline your reasons for working from home. Do you need to help care for an aging relative, for instance? Would working from home save you commuting time you could use for work?
· Address management’s concerns. Research indicates the biggest ones are the possibility of abuse of the system and issues of fairness.
· Consider your relationship with your manager. Has he or she been supportive of you in the past? Is your manager approachable?
When you’re ready, discuss your request with your manager. Remember, pitching the idea of telecommuting is the same as pitching any idea—you’ve got to think about what’s in it for your employer, not for yourself.
Sources: “The 2015 Workplace Flexibility Study,” WorkplaceTrends.com, February 3, 2015, https://workplacetrends.com/the-2015-workplace-flexibility-study/ ; T. S. Bernard, “For Workers, Less Flexible Companies,” The New York Times, May 20, 2014, B1, B7; and C. C. Miller and L. Alderman, “The Flexibility Gap,” The New York Times, December 14, 2014, 1, 5.
The opinions provided here are of the managers and authors only and do not necessarily reflect those of their organizations. The authors or managers are not responsible for any errors or omissions, or for the results obtained from the use of this information. In no event will the authors or managers, or their related partnerships or corporations thereof, be liable to you or anyone else for any decision made or action taken in reliance on the opinions provided here.
What kinds of jobs lend themselves to telecommuting? Writers, attorneys, analysts, and employees who spend the majority of their time on computers or the telephone—including telemarketers, customer-service representatives, reservation agents, and product-support specialists—are candidates. As telecommuters, they can access information on their computers at home as easily as in the company’s office.
OB Poll Who Works from Home?
Source: Bureau of Labor Statistics, Table 6 from Economic News Release, “American Time Use Survey Summary,” June 20, 2013, www.bls.gov/news.release/atus.t06.htm .
Telecommuting has several potential benefits. These include a larger labor pool from which to select (some people can/will only work by telecommuting), higher productivity, improved morale, and reduced office-space costs. A positive relationship exists between telecommuting and supervisor performance ratings, but a relationship between telecommuting and potentially lower turnover intentions has not been substantiated in research to date. 42 Beyond the benefits to organizations and their employees, telecommuting has potential benefits to society. One study estimated that if people in the United States telecommuted half the time, carbon emissions would be reduced by approximately 51 metric tons per year. Environmental savings could come about from lower office energy consumption, fewer traffic jams that emit greenhouse gasses, and a reduced need for road repairs. 43
Telecommuting has several downsides too. The major one for management is less direct supervision. In today’s team-focused workplace, telecommuting may also make it more difficult for managers to coordinate teamwork, and it can reduce knowledge transfer in organizations. 44 Managers are also challenged to handle the demotivation of office workers who feel they are unfairly denied the freedom of telecommuters. 45 Contrary to Mayer’s conclusions for Yahoo!, research indicates that more creative tasks may actually be best suited for telecommuting, whereas dull repetitive tasks like data entry decrease motivation and thus performance for remote workers. 46
From the employee’s standpoint, telecommuting can increase feelings of isolation and reduce job satisfaction. 47 Research indicates it does not reduce work–family conflicts, perhaps because it often increases work hours beyond the contracted workweek. 48 Telecommuters are also vulnerable to the “out of sight, out of mind” effect: Employees who aren’t at their desks, miss meetings, and don’t share in day-to-day informal workplace interactions may be at a disadvantage when it comes to raises and promotions because they’re perceived as not putting in the requisite “face-time.” 49 As for a CSR benefit of reducing car emissions by allowing telecommuting, research indicates that employees actually drive over 45 miles more per day, due to increased personal trips, when they telecommute! 50
Telecommuting is a contemporary reality, particularly in the minds of employees. However, initial studies suggest they view it differently in different cultures. For example, in China and perhaps in other collectivist cultures, employees are more comfortable with telecommuting when they clearly know what is expected of them and can acknowledge their manager’s superiority in their communications. 51 The success of telecommuting will always depend on the quality of communications in order to establish good, though remote, working relationships. Telecommuting certainly does appear to make sense given changes in technology, the nature of work, and preferences of younger workers. Yet as the Yahoo! experience shows, some leaders do not think those benefits outweigh the costs.
Employee Involvement and Participation
1. 4 Describe how employee involvement measures can motivate employees.
Employee involvement and participation (EIP) 52 is a process that uses employees’ input to increase their commitment to organizational success. If workers are engaged in decisions that increase their autonomy and control over their work lives, they will become more motivated, more committed to the organization, more productive, and more satisfied with their jobs. These benefits don’t stop with individuals—when teams are given more control over their work, morale and performance increase as well. 53
To be successful, EIP programs should be tailored to local and national norms. 54 A study of four countries, including India and the United States, confirmed the importance of modifying practices to reflect national culture. 55 While U.S. employees readily accepted EIP programs, managers in India who tried to empower their employees were rated low by those employees. These reactions are consistent with India’s high power–distance culture, which accepts and expects differences in authority. The work culture in India may not be in as much transition as in China, in which some employees are becoming less high power–distance oriented. Chinese workers who were very accepting of traditional Chinese cultural values showed few benefits from participative decision making. However, Chinese workers who were less traditional were more satisfied and had higher performance ratings under participative management. 56 Another study conducted in China showed that involvement increased employees’ thoughts and feelings of job security, enhancing their well-being. 57 These differences within China may well reflect the current transitional nature of that culture. For example, research in urban China indicated that some aspects of EIP programs, namely those that favor consultation and expression but not participation in decision making, yield higher job satisfaction. 58
Examples of Employee Involvement Programs
Let’s look at two major forms of employee involvement—participative management and representative participation—in more detail.
PARTICIPATIVE MANAGEMENT Common to all participative management programs is joint decision making, in which subordinates share a significant degree of decision-making power with their immediate superiors. This sharing can occur either formally through, say, briefings or surveys, or informally through daily consultations, as a way to enhance motivation through trust and commitment. 59 Participative management has, at times, been considered a panacea for poor morale and low productivity. In reality, for participative management to be effective, followers must have trust and confidence in their leaders. Leaders should avoid coercive techniques and instead stress the organizational consequences of decision making to their followers. 60
Studies of the participation–performance relationship have yielded mixed findings. 61 Organizations that institute participative management may realize higher stock returns, lower turnover rates, and higher labor productivity, although these effects are typically not large. 62 Research at the individual level indicates participation typically has only a modest influence on employee productivity, motivation, and job satisfaction. This doesn’t mean participative management isn’t beneficial. However, it is not a sure means for improving performance.
REPRESENTATIVE PARTICIPATION Most countries in western Europe require companies to practice representative participation . Representative participation redistributes power within an organization, putting labor’s interests on a more equal footing with the interests of management and stockholders by including a small group of employees as participants in decision making. In the United Kingdom, Ireland, Australia, and New Zealand, representative participation was originally the only EIP program, formed to allow employee representatives to discuss issues outside union agreements, and the representatives were all from the union. However, representative groups are now increasingly a mix of union and nonunion, or separate from the union arrangement. 63
Bernd Osterloh, chairman of Volkswagen’s works councils, speaks to production line workers at company headquarters in Wolfsburg, Germany. VW includes employees in decision making by allowing them to participate in discussions about work rules, the company’s finances and business plans, and workplace productivity and safety.
Source: Fabian Bimmer/Reuters
The two most common forms of representation are works councils and board representatives. Works councils are groups of nominated or elected employees who must be consulted when management makes decisions about employees. Board representatives are employees who sit on a company’s board of directors and represent employees’ interests.
The influence of representative participation on working employees seems to be mixed, but generally an employee would need to feel his or her interests are well represented and make a difference to the organization in order for motivation to increase. Thus representative participation as a motivational tool is surpassed by more direct participation methods.
In sum, EIP programs clearly have the potential to increase employees’ intrinsic motivation. The opportunity to make and implement decisions—and then see them work out—can contribute to all desirable organizational outcomes. And giving employees control over key decisions, along with ensuring that their interests are represented, can enhance feelings of procedural justice. But, like any other initiatives, EIP programs must be carefully designed.
Using Rewards to Motivate Employees
1. 5 Demonstrate how the different types of variable-pay programs can increase employee motivation.
As we saw in Chapter 3 , pay is not the only factor driving job satisfaction. However, it does motivate people, and companies often underestimate its importance. One study found that while 45 percent of employers thought pay was a key factor in losing top talent, 71 percent of top performers called it a top reason. 64
Given that pay is so important, will the organization lead, match, or lag the market in pay? How will individual contributions be recognized? In this section, we consider (1) what to pay employees (decided by establishing a pay structure), and (2) how to pay individual employees (decided through variable-pay plans).
What to Pay: Establishing a Pay Structure
There are many ways to pay employees. The process of initially setting pay levels entails balancing internal equity—the worth of the job to the organization (usually established through a technical process called job evaluation), and external equity—the competitiveness of an organization’s pay relative to pay in its industry (usually established through pay surveys). Obviously, the best pay system reflects what the job is worth while also staying competitive relative to the labor market.
Cary Chin works at the front desk for Gravity Payments, a credit card processing firm in Seattle, where the cost of living is extremely high. Gravity’s CEO Dan Price established a new pay structure for all employees of a $70,000 base salary to improve their quality of life and motivate them to work harder on achieving high customer satisfaction.
Source: Ted S. Warren/AP Images
Some organizations prefer to pay above the market, while some may lag the market because they can’t afford to pay market rates, or they are willing to bear the costs of paying below market (namely, higher turnover as people are lured to better-paying jobs). Some companies that have realized impressive gains in income and profit margins have done so in part by holding down employee wages; they include Comcast, Walt Disney, McDonald’s, and AT&T. 65
Pay more, and you may get better-qualified, more highly motivated employees who will stay with the organization longer. A study covering 126 large organizations found employees who believed they were receiving a competitive pay level had higher morale and were more productive, and customers were more satisfied as well. 66 But pay is often the highest single operating cost for an organization, which means paying too much can make the organization’s products or services too expensive. It’s a strategic decision an organization must make, with clear trade-offs.
In the case of Walmart, it appears that its strategic decision on pay did not work. While annual growth in U.S. stores slowed to around 1 percent in 2011, one of Walmart’s larger competitors, Costco, grew around 8 percent. The average worker at Costco made approximately $45,000, compared to approximately $17,500 for the average worker at Walmart-owned Sam’s Club. Costco’s strategy was that it will get more if it pays more—and higher wages resulted in increased employee productivity and reduced turnover. Given the recent Walmart decision to increase worker wages throughout the organization, perhaps its executives agree. 67
How to Pay: Rewarding Individual Employees through Variable-Pay Programs
“Why should I put any extra effort into this job?” asked Anne, a fourth-grade elementary schoolteacher in Denver, Colorado. “I can excel or I can do the bare minimum. It makes no difference. I get paid the same. Why do anything above the minimum to get by?” Comments like Anne’s have been voiced by schoolteachers for decades because pay increases were tied to seniority. Recently, however, a number of states have revamped their compensation systems to motivate teachers by linking pay to results in the classroom, and other states are considering such programs, admittedly with mixed results so far. 68 Many organizations, public and private, are moving away from pay based on seniority or credentials.
Piece-rate, merit-based, bonus, profit-sharing, and employee stock ownership plans are all forms of a variable-pay program (also known as pay-for-performance), which bases a portion of an employee’s pay on some individual and/or organizational measure of performance. The variable portion may be all or part of the paycheck, and it may be paid annually or upon attainment of benchmarks. It can also be either optional for the employee or an accepted condition of employment. 69 Variable-pay plans have long been used to compensate salespeople and executives, but the scope of variable-pay jobs has broadened.
Globally, around 80 percent of companies offer some form of variable-pay plan. In the United States, 91 percent of companies offer a variable-pay program. 70 In Latin America, more than 90 percent of companies offer some form of variable-pay plan. Latin American companies also have the highest percentage of total payroll allocated to variable pay, at nearly 18 percent. European and U.S. companies are lower, at about 12 percent. 71 When it comes to executive compensation, Asian companies are outpacing Western companies in their use of variable pay. 72
Unfortunately, not all employees see a strong connection between pay and performance. The results of pay-for-performance plans are mixed; the context and receptivity of the individual to the plans play a large role. For instance, one study of 415 companies in South Korea suggested that group-based pay-for-performance plans may have a strong positive effect on organizational performance. 73 On the other hand, research in Canada indicated that variable-pay plans increase job satisfaction only if employee effort is rewarded as well as performance. 74 Finally, secrecy pays a role in the motivational success of variable-pay plans. Although in some government and not-for-profit agencies, pay amounts are either specifically or generally made public, most U.S. organizations encourage or require pay secrecy. 75 Is this good or bad? Unfortunately, it’s bad: pay secrecy has a detrimental effect on job performance. Even worse, it adversely affects high performers more than other employees. It very likely increases employees’ perception that pay is subjective, which can be demotivating. While individual pay amounts may not need to be broadcast to restore the balance, if general pay categories are made public and employees feel variable pay is linked objectively to their performance, the motivational effects of variable pay can be retained. 76
The fluctuation in variable pay is what makes these programs attractive to management. It turns part of an organization’s fixed labor costs into a variable cost, thus reducing expenses when performance declines. For example, when the U.S. economy encountered a recession in 2001 and again in 2008, companies with variable pay were able to reduce their labor costs much faster than others. 77 When pay is tied to performance, the employee’s earnings also reflect their contributions rather than being a form of entitlement. Over time, low performers’ pay stagnates, while high performers enjoy pay increases commensurate with their contributions.
Let’s examine the different types of variable-pay programs in more detail.
PIECE-RATE PAY The piece-rate pay plan has long been popular as a means of compensating production workers with a fixed sum for each unit of production completed, but it can be used in any organizational setting where the outputs are similar enough to be evaluated by quantity. A pure piece-rate plan provides no base salary and pays the employee only for what he or she produces. Ballpark workers selling peanuts and soda are frequently paid piece-rate. If they sell 40 bags of peanuts at $1 each for their earnings, their take is $40. The more peanuts they sell, the more they earn. Alternatively, piece-rate plans are sometimes distributed to sales teams, so a ballpark worker makes money on a portion of the total number of bags of peanuts sold by the group during a game.
Piece-rate plans are known to produce higher productivity and wages, so they can be attractive to organizations and motivating for workers. 78 In fact, one major Chinese university increased its piece-rate pay for articles by professors and realized 50 percent increased research productivity. 79 In the workplace, employees most likely to be motivated by piece-rate plans are managers and more tenured workers. Low-performing workers are generally not interested in piece-rate pay, for obvious reasons—they won’t get paid much!
The chief concern of both individual and team piece-rate workers is financial risk. A recent experiment in Germany found that 68 percent of risk-averse individuals prefer an individual piece-rate system, and that lower performers prefer team piece-rate pay. Why? The authors suggested risk-averse and high-performing individuals would rather take their chances on pay based on what they can control (their own work) because they are concerned others will slack off in a team setting. 80 This is a valid concern, as we will discuss in the next chapter. Organizations, on the other hand, should verify that their piece-rate plans are indeed motivating to individuals. European research has suggested that when the pace of work is determined by uncontrollable outside factors such as customer requests, rather than internal factors such as coworkers, targets, and machines, a piece rate plan is not motivating. 81 Either way, managers must be mindful of the motivation for workers to decrease quality in order to increase their speed of output. They should also be aware that by rewarding volume, piece-rate plans increase the probability of workplace injuries. 82
Thus, while piece-rate plans can be a powerful motivator in many organizational settings, an obvious limitation is that they’re not feasible for many jobs. An emergency room (ER) doctor and nurse can earn significant salaries regardless of the number of patients they see or their patients’ outcomes. Would it be better to pay them only if their patients fully recover? It seems unlikely that most would accept such a deal, and it might cause unanticipated consequences as well (such as ERs turning away patients with terminal diseases or life-threatening injuries). So, although incentives are motivating and relevant for some jobs, it is unrealistic to think they work universally.
MERIT-BASED PAY A merit-based pay plan pays for individual performance based on performance appraisal ratings. A main advantage is that high performers can get bigger raises. If designed correctly, merit-based plans let individuals perceive a strong relationship between their performance and their rewards. 83
Most large organizations have merit pay plans, especially for salaried employees. Merit pay is slowly taking hold in the public sector. For example, most U.S. government employees are unionized, and the unions that represent them have usually demanded that pay raises be based solely on seniority. Claiming a new era of accountability, however, New Jersey Governor Chris Christie implemented merit pay for teachers. The Newark teachers union approved the plan, which included funding from Facebook CEO Mark Zuckerberg. 84 In another unusual move, New York City’s public hospital system pays doctors based on how well they reduce costs, increase patient satisfaction, and improve the quality of care. 85
A move away from merit pay, on the other hand, is coming from some organizations that don’t feel it separates high and low performers enough. “There’s a very strong belief and there’s evidence and academic research that shows that variable pay does create focus among employees,” said Ken Abosch, a compensation manager at human resource consulting firm Aon Hewitt. But when the annual review and raise are months away, the motivation of this reward for high performers diminishes. Even companies that have retained merit pay are rethinking the allocation. 86
Although you might think a person’s average level of performance is the key factor in merit pay decisions, the projected level of future performance also plays a role. One study found that National Basketball Association (NBA) players whose performance was on an upward trend were paid more than their average performance would have predicted. Managers of all organizations may unknowingly be basing merit pay decisions on how they think employees will perform, which may result in overly optimistic (or pessimistic) pay decisions. 87
Despite their intuitive appeal, merit pay plans have several limitations. One is that they are typically based on an annual performance appraisal and thus are only as valid as the performance ratings, which are often subjective. This brings up issues of discrimination, as we discussed in Chapter 2 . Research indicates that African American employees receive lower performance ratings than white employees, women’s ratings are higher than men’s, and there are demographic differences in the distribution of salary increases, even with all other factors equal. 88 Another limitation is that the pay-raise pool of available funds fluctuates on economic or other conditions that have little to do with individual performance. For instance, a colleague at a top university who performed very well in teaching and research was given a pay raise of $300. Why? Because the pay-raise pool was very small. Yet that amount is more of a cost-of-living increase than pay-for-performance. Lastly, unions typically resist merit pay plans. Relatively few teachers are covered by merit pay for this reason. Instead, seniority-based pay, which gives all employees the same raises, predominates.
The concept and intention of merit pay—that employees are paid for performance—is sound. For employee motivation purposes, however, merit pay should be only one part of a performance recognition program.
BONUS An annual bonus is a significant component of total compensation for many jobs. Once reserved for upper management, bonus plans are now routinely offered to employees in all levels of the organization. The incentive effects should be higher than those of merit pay because rather than paying for previous performance now rolled into base pay, bonuses reward recent performance (merit pay is cumulative, but the increases are generally much smaller than bonus amounts). When times are bad, firms can cut bonuses to reduce compensation costs. Workers on Wall Street, for example, saw their average bonus drop by more than a third as their firms faced greater scrutiny. 89
Chinese Internet firm Tencent Holdings rewards employees with attractive incentives that include cash bonuses for lower-ranking employees. The young men shown here were among 5,000 employees who received a special bonus tucked in red envelopes and personally handed out by Tencent’s CEO and co-founder Pony Ma.
Source: Keita Wen sz/Imaginechina via AP Images
Bonus plans have a clear upside: they are motivating for workers. As an example, a recent study in India found that when a higher percentage of overall pay was reserved for the potential bonuses of managers and employees, productivity increased. 90 This example also highlights the downside of bonuses: They leave employees’ pay more vulnerable to cuts. This is problematic especially when employees depend on bonuses or take them for granted. “People have begun to live as if bonuses were not bonuses at all but part of their expected annual income,” said Jay Lorsch, a Harvard Business School professor. KeySpan Corp., a 9,700-employee utility company in New York, combined yearly bonuses with a smaller merit-pay raise. Elaine Weinstein, KeySpan’s senior vice president of HR, credits the plan with changing the culture from “entitlement to meritocracy.” 91
The way bonuses and rewards are categorized also affects peoples’ motivation. Although it is a bit manipulative, splitting rewards and bonuses into categories—even if the categories are meaningless—may increase motivation. 92 Why? Because people are more likely to feel they missed out on a reward if they don’t receive one from each category, and then work harder to earn rewards from more categories.
PROFIT-SHARING PLAN A profit-sharing plan distributes compensation based on some established formula designed around a company’s profitability. Compensation can be direct cash outlays or, particularly for top managers, allocations of stock options. When you read about executives like Mark Zuckerberg, who accepts an absurdly modest $1 salary, remember that many executives are granted generous stock options. In fact, Zuckerberg has made as much as $2.3 billion after cashing out some of his stock options. 93 Of course, the vast majority of profit-sharing plans are not so grand in scale. For example, Jacob Luke started his own lawn-mowing business at age 13. He employed his brother Isaiah and friend Marcel and paid them each 25 percent of the profits he made on each yard.
Studies generally support the idea that organizations with profit-sharing plans have higher levels of profitability than those without them. 94 These plans have also been linked to higher levels of employee commitment, especially in small organizations. 95 Profit-sharing at the organizational level appears to have positive impacts on employee attitudes; employees report a greater feeling of psychological ownership. 96 Recent research in Canada indicates that profit-sharing plans motivate individuals to higher job performance when they are used in combination with other pay-for-performance plans. 97 Obviously, profit sharing does not work when there is no reported profit per se, such as in nonprofit organizations, or often in the public sector. However, profit sharing may make sense for many organizations, large or small.
EMPLOYEE STOCK OWNERSHIP PLAN An employee stock ownership plan (ESOP) is a company-established benefit plan in which employees acquire stock, often at below-market prices, as part of their benefits. Research on ESOPs indicates they increase employee satisfaction and innovation. 98 ESOPs have the potential to increase job satisfaction only when employees psychologically experience ownership. 99 Even so, ESOPs may not inspire lower absenteeism or greater motivation, 100 perhaps because the employee’s actual monetary benefit comes with cashing in the stock at a later date. Thus, employees need to be kept regularly informed of the status of the business and have the opportunity to positively influence it in order to feel motivated toward higher personal performance. 101
An Ethical Choice
Sweatshops and Worker Safety
Industrialized countries have come a long way in terms of worker safety and compensation. The number of worker-related injuries has decreased substantially over generations, and many employees earn better wages than in the past. Unfortunately, the same cannot be said for all parts of the world.
To keep costs down, many Western companies and their managers turn to suppliers in developing nations, where people have little choice but to work for low pay and no benefits, in top-down management structures without participative management opportunities or unions to represent them. Unregulated and even unsafe working conditions are common, especially in the garment industry. However, three recent accidents in Bangladesh are raising questions about the ethics of tolerating and supporting such conditions. In November 2012, a fire at the Tazreen Fashion factory that made low-cost garments for several U.S. stores, including Walmart, killed 112 workers. In April 2013, the collapse of Rana Plaza, home to a number of garment factories, killed more than 1,100. And in May 2013, a fire at the Tung Hai Sweater Company killed 8 workers. An investigation of the Rana Plaza incident revealed that the building had been constructed without permits, using substandard materials. Although workers reported seeing and hearing cracks in the structure of the building, they were ordered back to work.
In response, some companies such as PVH, owner of Tommy Hilfiger and Calvin Klein, as well as Tchibo, a German retailer, have signed the legally binding “IndustriALL” proposal, which requires overseas manufacturers to conduct building and fire-safety inspections regularly and to make their findings public. However, many other companies have not signed, and none of the 15 companies whose clothing was manufactured at the Rana Plaza plant donated to the International Labour Organization fund for survivors.
With the rise of CSR initiatives, what is the responsibility of organizations toward the working conditions of their subcontractors, at home or abroad? Professor Cindi Fukami asks, “Should [companies] outsource the production of these items made under conditions that wouldn’t be approved of in the United States, but . . . are perfectly legal in the situation where they are [produced]?” There is clearly not an easy solution.
Sources: B. Kennedy, “The Bangladesh Factory Collapse One Year Later,” CBS, April 23, 2014, http://www.cbsnews.com/news/the-bangladesh-factory-collapse-one-year-later/ ; J. O’Donnell and C. Macleod, “Latest Bangladesh Fire Puts New Pressure on Retailers,” USA Today, May 9, 2013, www.usatoday.com ; and T. Hayden, “Tom Hayden: Sweatshops Attract Western Investors,” USA Today, May 17, 2013, www.usatoday.com .
ESOPs for top management can reduce unethical behavior. For instance, CEOs are less likely to manipulate firm earnings reports to make themselves look good in the short run when they have an ownership share. 102 Of course, not all companies want ESOPs, and they won’t work in all situations, but they can be an important part of an organization’s motivational strategy.
EVALUATION OF VARIABLE PAY Do variable-pay programs increase motivation and productivity? Generally yes, but that doesn’t mean everyone is equally motivated by them. 103 Many organizations have more than one variable pay element in operation, such as an ESOP and bonuses, so managers should evaluate the effectiveness of the overall plan in terms of the employee motivation gained from each element separately and from all elements together. Managers should monitor their employees’ performance-reward expectancy, since a combination of elements that makes employees feel that their greater performance will yield them greater rewards will be the most motivating. 104
Using Benefits to Motivate Employees
1. 6 Show how flexible benefits turn benefits into motivators.
Now that we have discussed what and how to pay employees, let’s discuss two other motivating factors organizations must decide: (1) what benefits and choices to offer (such as flexible benefits), and (2) how to construct employee recognition programs. Like pay, benefits are both a provision and a motivator. Whereas organizations of yesteryear issued a standard package to every employee, contemporary leaders understand that each employee values benefits differently. A flexible program turns the benefits package into a motivational tool.
Flexible Benefits: Developing a Benefits Package
Todd E. is married and has three young children; his wife is at home full-time. His Citigroup colleague Allison M. is married too, but her husband has a high-paying job with the federal government, and they have no children. Todd is concerned about having a good medical plan and enough life insurance to support his family in case it’s needed. In contrast, Allison’s husband already has her medical needs covered on his plan, and life insurance is a low priority. Allison is more interested in extra vacation time and long-term financial benefits such as a tax-deferred savings plan.
A standardized benefits package would be unlikely to meet the needs of Todd and Allison well. Citigroup can, however, cover both sets of needs with flexible benefits.
Consistent with expectancy theory’s thesis that organizational rewards should be linked to each employee’s goals, flexible benefits individualize rewards by allowing each employee to choose the compensation package that best satisfies his or her current needs and situation. Flexible benefits can accommodate differences in employee needs based on age, marital status, partner’s benefit status, and number and age of dependents.
Benefits in general can be a motivator for a person to go to work, and for a person to choose one organization over another. But are flexible benefits more motivating than traditional plans? It’s difficult to tell. Some organizations that have moved to flexible plans report increased employee retention, job satisfaction, and productivity. However, flexible benefits may not substitute for higher salaries when it comes to motivation. 105 Furthermore, as more organizations worldwide adopt flexible benefits, the individual motivation they produce will likely decrease (the plans will be seen as a standard work provision). The downsides of flexible benefit plans may be obvious: They may be more costly to administrate, and identifying the motivational impact of different provisions is challenging.
Given the intuitive motivational appeal of flexible benefits, it may be surprising that their usage is not yet global. In China, only a limited percentage of companies offer flexible plans, 106 as in other Asian countries. 107 Almost all major corporations in the United States offer them, and a recent survey of 211 Canadian organizations found that 60 percent offer flexible benefits, up from 41 percent in 2005. 108 A similar survey of firms in the United Kingdom found that nearly all major organizations were offering flexible benefits programs, with options ranging from supplemental medical insurance to holiday trading (with coworkers), discounted bus travel, and child care assistance. 109
Using Intrinsic Rewards to Motivate Employees
1. 7 Identify the motivational benefits of intrinsic rewards.
We have discussed motivating employees through job design and by the extrinsic rewards of pay and benefits. On an organizational level, are those the only ways to motivate employees? Not at all! We would be remiss if we overlooked intrinsic rewards organizations can provide, such as employee recognition programs, discussed next.
Employee Recognition Programs
Laura makes $8.50 per hour working at her fast-food job in Pensacola, Florida, and the job isn’t very challenging or interesting. Yet Laura talks enthusiastically about the job, her boss, and the company that employs her. “What I like is the fact that Guy [her supervisor] appreciates the effort I make. He compliments me regularly in front of the other people on my shift, and I’ve been chosen Employee of the Month twice in the past six months. Did you see my picture on that plaque on the wall?”
Organizations are increasingly realizing what Laura knows: Recognition programs and other ways of increasing an employee’s intrinsic motivation work. An employee recognition program is a plan to encourage specific behaviors by formally appreciating specific employee contributions. Employee recognition programs range from a spontaneous and private thank-you to widely publicized formal programs in which the procedures for attaining recognition are clearly identified.
As companies and government organizations face tighter budgets, nonfinancial incentives become more attractive. Everett Clinic in Washington State uses a combination of local and centralized initiatives to encourage managers to recognize employees. 110 Employees and managers give “Hero Grams” and “Caught in the Act” cards to colleagues for exceptional accomplishments at work. Part of the incentive is simply to receive recognition, but there are also drawings for prizes based on the number of cards a person receives. Multinational corporations like Symantec Corporation, Intuit, and Panduit have also increased their use of recognition programs. Symantec claims it increased engagement 14 percent in less than a year due to the Applause recognition program administered by Globoforce, a corporation that implements employee recognition programs. 111 Centralized programs across multiple offices in different countries can help ensure that all employees, regardless of where they work, can be recognized for their contribution to the work environment. 112 Recognition programs are common in Canadian and Australian firms as well. 113
A few years ago, 1,500 employees were surveyed in a variety of work settings to find out what they considered the most powerful workplace motivator. Their response? Recognition, recognition, and more recognition. Other research suggests financial incentives may be more motivating in the short term, but in the long run nonfinancial incentives work best. 114 Surprisingly, there is not a lot of research on the motivational outcomes or global usage of employee recognition programs. However, recent studies indicate that employee recognition programs are associated with self-esteem, self-efficacy, and job satisfaction, 115 and the broader outcomes from intrinsic motivation are well documented.
An obvious advantage of recognition programs is that they are inexpensive: praise is free! 116 With or without financial rewards, they can be highly motivating to employees. Despite the increased popularity of such programs, though, critics argue they are highly susceptible to political manipulation by management. When applied to jobs for which performance factors are relatively objective, such as sales, recognition programs are likely to be perceived by employees as fair. In most jobs, however, performance criteria aren’t self-evident, which allows managers to manipulate the system and recognize their favorites. Abuse can undermine the value of recognition programs and demoralize employees. Therefore, where formal recognition programs are used, care must be taken to ensure fairness. Where they are not, it is important to motivate employees by consistently recognizing their performance efforts.
Watch It!
If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete the video exercise titled Zappos: Motivating Employees Through Company Culture .
Summary
As we’ve seen in the chapter, understanding what motivates individuals is ultimately key to organizational performance. Employees whose differences are recognized, who feel valued, and who have the opportunity to work in jobs tailored to their strengths and interests will be motivated to perform at the highest levels. Employee participation also can increase employee productivity, commitment to work goals, motivation, and job satisfaction. However, we cannot overlook the powerful role of organizational rewards in influencing motivation. Pay, benefits, and intrinsic rewards must be carefully and thoughtfully designed in order to enhance employee motivation toward positive organizational outcomes.