2 Assignments: PAPER – Construction Management & Small Business

The Challenge of Motivating Workers (Notes taken from textbook. Reference below)

Reference: Scarborough, N. M., & Cornwall, J. R. (2014a). Entrepreneurship and Effective Small Business Management. The Challenge of Motivating Workers (11th Edition, pp. 728–734). Pearson Education.

Motivation is the degree of effort an employee exerts to accomplish a task; it shows up as excitement about work. Motivating workers to higher levels of performance is one of the most difficult and challenging tasks facing a small business manager. Few things are more frustrating to an entrepreneur than an employee with a tremendous amount of talent who lacks the desire to use it. This section discusses four aspects of motivation: empowerment, job design, rewards and compensation, and feedback.

Empowerment

One motivating principle is empowerment. Empowerment involves giving workers at every level of the organization the authority, the freedom, and the responsibility to control their own work, to make decisions, and to take action to meet the company’s objectives. Research indicates that employees experience increased initiative and motivation when they are empowered. Empowerment affects their self-confidence and the level of tenacity they display when faced with setbacks. Empowered employees take responsibility for making decisions and following them through to completion. “The credit for Virgin’s enduring and varied success is often attributed to me,” says Richard Branson, successful entrepreneur and founder of Virgin Group. “But it’s actually due to the people who piloted those businesses. My decision to give them autonomy and encourage them to take risks has allowed us to grow while keeping costs down. Empowerment complements the team-based management style discussed earlier.

Empowerment builds on what real business leaders already know: that the people in their organizations bring with them to work an amazing array of talents, skills, knowledge, and abilities. Workers are willing—even anxious—to put these to use; unfortunately, in too many businesses, suffocating management styles and poorly designed jobs quash workers’ enthusiasm and motivation. Enlightened entrepreneurs recognize their workers’ abilities, develop them, and then give workers the freedom and the power to use them. Entrepreneurs who share information, responsibility, authority, and power soon discover that their success (and their companies’ success) is magnified many times over.

When implemented properly, empowerment can produce impressive results not only for the business but also for newly empowered employees. For the business, benefits typically include significant productivity gains, quality improvement, more satisfied customers, improved morale, and increased employee motivation. For workers, empowerment offers the chance to do a greater variety of work that is interesting and challenging. Empowerment challenges workers to make the most of their creativity, imagination, knowledge, and skills.

Not every worker wants to be empowered, however. Some will resist, wanting only to “put in their eight hours and go home.” Companies that move to an empowerment philosophy will lose about 5 percent of their workforce because they simply are unwilling or are unable to make the change. Another 75

percent of the typical workforce will accept empowerment and thrive under it, and the remaining 20 percent will pounce on it eagerly because they want to contribute their talents and their ideas.

Empowerment works best when entrepreneurs do the following:

• Are confident enough to give workers all the authority and responsibility they can handle. Initially, this may involve giving workers the power to tackle relatively simple assignments. As their confidence and ability grow, most workers are eager to take on additional responsibility.

• Play the role of coach and facilitator. Smart owners empower their workers and then get out of the way so that they can do their jobs.

• Recognize that empowered employees will make mistakes. The worst thing an owner can do when empowered employees make mistakes is to hunt them down and punish them. That teaches everyone in the company to avoid taking risks and to always play it safe—something that no innovative small business can afford.

• Hire people who can blossom in an empowered environment. Empowerment is not for everyone. Owners quickly learn that as costly as hiring mistakes are, such errors are even more costly in an empowered environment. Ideal candidates are high-energy self-starters who enjoy the opportunity to grow and enhance their skills.

• Train workers continuously to upgrade their skills. Empowerment demands more of workers than traditional work methods. Managers are asking workers to solve problems and make decisions they have never made before. To handle these problems well, workers need training, especially in effective problem-solving techniques, communication, team-work, and technical skills.

• Trust workers to do their jobs. Once workers are trained to do their jobs, owners must learn to trust them to assume responsibility for their jobs. After all, they are the real experts; they face the problems and challenges every day.

• Listen to workers when they have ideas, solutions, or suggestions. Because they are the experts on the job, employees often come up with incredibly insightful, innovative ideas for improving them—if entrepreneurs give them the chance. Surveying employees, for ex-ample, can become a critical part of companies’ efforts to bolster employees’ commitment to their jobs, a concept called employee engagement. Engaged workers are more willing to help bosses and coworkers solve problems, take initiative, promote the company outside of work, and offer ideas for improving the company. Failing to acknowledge or act on employees’ ideas sends them a clear message: Your ideas really don’t count.

• Recognize workers’ contributions. One of the most important tasks an entrepreneur can perform is to recognize positive employee performance. In The Carrot Principle, authors Adrian Gostick and Chester Elton say that recognition must be frequent, specific and timely, and, of course, deserved.72 Some businesses reward workers with monetary awards, others rely on recognition and praise, and still others use a combination of money and praise. Whatever system an owner chooses, the key to keeping a steady flow of ideas, improvements, suggestions, and solutions is to recognize the people who supply them.

• Share information with workers. For empowerment to succeed, entrepreneurs must make sure workers get adequate information, the raw material for good decision making. Some companies have gone beyond sharing information to embrace open-book management, in which employees have access to all of a company’s records, including its financial statements. The goal

of open-book management is to enable employees to understand why they need to raise productivity, improve quality, cut costs, and improve customer service. Under open-book management, employees do the following:

o Review and learn to understand the company’s financial statements and other critical numbers in measuring its performance.

o Learn that a significant part of their jobs is making sure that those critical numbers move in the right direction.

o Have a direct stake in the company’s success through profit sharing, equity-like compensation such as employee stock ownership plans, or performance-based bonuses.

Job Design

A recent survey by the Conference Board shows that only 47 percent of employees are satisfied with their jobs, a significant decrease from 61 percent in 1987. About the same percentage find their work interesting.74 Managers have learned that the job itself and the way it is designed can make it more interesting and can be a source of satisfaction and motivation for workers. During the industrial age, work was organized on the principle of job simplification, which involves breaking the work down into its simplest form and standardizing each task. Assembly-line operations are based on job simplification. The scope of workers’ jobs is extremely narrow, resulting in impersonal, monotonous, and boring work that creates little challenge or motivation for workers. The result is apathetic, unmotivated workers who care little about quality, customers, or costs.

To break this destructive cycle, some companies have redesigned workers’ jobs. The follow-ing strategies are common: job enlargement, job rotation, job enrichment, flextime, job sharing, and flexplace.

Job enlargement (or horizontal job loading) adds more tasks to a job to broaden its scope. For instance, rather than an employee simply mounting four screws in computers coming down an assembly line, a worker might assemble, install, and test the entire motherboard (perhaps as part of a team). The idea is to make the job more varied and to allow employees to perform a more complete unit of work.

Job rotation involves cross training employees so that they can move from one job in the company to others, giving them a greater number and variety of tasks to perform. As employees learn other jobs within an organization, both their skills and their understanding of the company purpose and processes rise. Cross-trained workers are more valuable because they give a company the flexibility to shift workers from low-demand jobs to those where they are most needed. As an incentive for workers to learn to perform other jobs within an operation, some companies offer skill-based pay, a system under which the more skills workers acquire, the more they earn.

Job enrichment (or vertical job loading) involves building motivators into a job by increasing the planning, decision making, organizing, and controlling functions—traditionally manage-rial tasks—that workers perform. The idea is to make every employee a manager or at least a manager of his or her own job.

To enrich employees’ jobs, a business owner must build five core characteristics into them:

o Skill variety is the degree to which a job requires a variety of different skills, talents, and activities from the worker. Does the job require the worker to perform a variety of tasks

that demand a variety of skills and abilities, or does it force him or her to perform the same task repeatedly?

o Task identity is the degree to which a job allows the worker to complete a whole or identifiable piece of work. Does the employee build an entire piece of furniture (perhaps as part of a team), or does he or she merely attach four screws?

o Task significance is the degree to which a job substantially influences the lives or work of others—employees or final customers. Does the employee get to deal with customers, either internal or external? One effective way to establish task significance is to put employees in touch with customers so that they can see how customers use the product or service they make.

o Autonomy is the degree to which a job gives a worker the freedom, independence, and discretion in planning and performing tasks. Does the employee make decisions affecting his or her work, or must he or she rely on someone else (the owner, a manager, or a supervisor) to “call the shots?”

o Feedback is the degree to which a job gives the worker direct, timely information about the quality of his performance. Does the job give employees feedback about the quality of their work, or does the product (and all information about it) simply disappear after it leaves the worker’s station?

A study conducted by researchers at the University of New Hampshire and the Bureau of Labor Statistics concludes that employees of companies that use job enrichment principles are more satisfied than those who work in jobs designed using principles of simplification.

Flextime is an arrangement under which employees work a normal number of hours but have flexibility about when they start and stop work. Several recent studies suggest that employees show improved mental and physical health when they work in a company that offers flextime. Most flextime arrangements require employees to build their work schedules around a set of “core hours,” such as 10 a.m. to 2 p.m., but give them the freedom to set their schedules outside of those core hours. For instance, one worker might choose to come in at 7 a.m. and leave at 3 p.m. to attend her son’s soccer game, and another may work from 11 a.m. to 7 p.m. Flextime not only raises worker morale but also makes it easier for companies to attract high-quality young workers who want rewarding careers without sacrificing their lifestyles. In addition, companies using flextime schedules experience higher levels of employee engagement and lower levels of tardiness, turnover, and absenteeism.

Flextime is becoming an increasingly popular job design strategy. A recent survey by the Families and Work Institute reports that 77 percent of the nation’s workers have flexible schedules, up from 66 percent in 2005.77 The number of companies using flextime is likely to continue to grow as companies find recruiting capable, qualified full-time workers more difficult and as technology makes working from a dedicated office space less important. Research shows that when considering job offers, candidates, particularly members of Generation Y, weigh heavily the flexibility of the work schedule that companies offer.

Job sharing is a work arrangement in which two or more people share a single full-time job. For instance, two college students might share the same 40-hour-a-week job, one working morning and the other working afternoons. Salary and benefits are prorated between the workers sharing a job. Because job sharing is a simple solution to the growing challenge of life–work balance, it is becoming more

popular. Companies already using it are finding it easier to recruit and retain qualified workers. “Employers get the combined strengths of two people, but they only have to pay for one,” says one hotel sales manager, herself a job sharer.

Flexplace is a work arrangement in which employees work at a place other than a traditional office, such as a satellite branch closer to their homes or, in many cases, at home. Flexplace is an easy job design strategy for companies to use because of telecommuting. Using modern communication technology such as iPads, smart phones, texting, e-mail, and laptop computers, employees have more flexibility in choosing where they work. Today, it is simple for workers to connect electronically to their workplaces (and to all of the people and the information there) from practically anywhere on the planet.

Before implementing telecommuting, entrepreneurs must address the following important issues:

o Does the nature of the work fit telecommuting? Obviously, some jobs are better suited for telecommuting than others.

o Have you selected the right employees for telecommuting? Telecommuting is not suitable for every job or for every worker. Experienced managers say that employees who handle it best are experienced workers who know their jobs well, are self- disciplined, and are good communicators.

o Can you monitor compliance with federal wage and hour laws for telecommuters? Gener-ally, employers must keep the same employment records for telecommuters that they do for traditional office workers.

o Have you provided the necessary computer, communications, and ergonomically designed office equipment for employees to work offsite? Trying to “make do” with substandard equipment creates problems and frustration and undermines any telecommuting effort from the outset.

o Are you adequately insured? Employers should be sure that the telecommuting equipment that employees use in their homes is covered under their insurance policies.

o Can you keep in touch? Telecommuting works well as long as long-distance employees stay in touch with headquarters.

o Have you created an equitable telecommuting policy that defines under what conditions telecommuting is acceptable? One danger of telecommuting is that it can create resentment among employees who remain office bound.

Rewards and Compensation

The rewards an employee receives from the job itself are intrinsic, but managers use a wide variety of extrinsic rewards to motivate workers at their disposal. The key to using rewards to motivate involves tailoring the reward system to the needs and characteristics of the workers. Effective reward systems tap into the values and issues that are important to people. Smart en-trepreneurs take the time to learn what makes their employees “tick” and then build their re-ward system around those motivational factors. For instance, a technician making $30,000 a year may consider a chance to earn a $5,000 bonus to be a powerful motivator; an executive earning $200,000 a year may not.

Research by Globoforce, a Boston-based company that specializes in rewards and incentives, shows that small, frequent awards are more effective than periodic cash bonuses, which is good news for small companies that cannot always afford financial rewards. The study suggests that 80 to 90 percent of a

company’s employees should get some type of reward every year and that every week a company should be giving rewards to 5 percent of its employees (a concept known as continuous reinforcement). “Small awards all the time are a way to constantly touch people,” he says. Jennifer Lepird, who works in the human resources department at software developer Intuit, recently spent several weeks and many long days integrating into Intuit’s salary structure the employees at a company that Intuit had purchased. Her manager sent her a con-gratulatory e-mail thanking her for her quality work and a gift certificate worth $200. Lepird was thrilled. “The fact that somebody took the time to recognize the effort made the long hours just melt away,” she says.

One of the most popular rewards is money. Cash is an effective motivator—up to a point; its effects tend to be short-term. Many companies have moved to pay-for-performance com-pensation systems, in which employees’ pay depends on how well they perform their jobs. In other words, extra productivity equals extra pay. By linking employees’ compensation directly to the company’s financial performance, an entrepreneur increases the likelihood that workers will achieve performance targets that are in their best interest and in the company’s best interest. A common application of the pay-for-performance concept is a profit-sharing system in which a company shares a portion of its profit with the employees who work to produce it.

Pay-for-performance systems work only when employees see a clear correlation between their performance and their pay. This offers an advantage for small companies when the em-ployees can see clearly the impact that their performance has on the company’s profitability and ultimate success compared to their counterparts at large corporations. To be successful, however, pay-for-performance systems should meet the following criteria:

• Performance based. Employees’ incentive pay must be clearly and closely linked to their performances.

• Relevant. Entrepreneurs must set up the system so that employees see the connection be- tween what they do every day on the job—selling to customers, producing a product, or anything else—and the rewards they receive under the system.

• Simple. The system must be simple enough so that employees understand and trust it. Complex systems that employees have difficulty understanding will not produce the desired results.

• Equitable. Employees must consider the system fair. • Inclusive. The system should be inclusive. Entrepreneurs are finding creative ways to reward all

employees no matter what their jobs might be. • Timely. The company should make timely payouts to employees. A single annual payout is

ineffective employees have long since forgotten what they did to earn the incentive pay. The closer a reward payment is to the action that prompted it, the more effective it will be.

Money is not the only motivator entrepreneurs have at their disposal. Nonfinancial incentives can be more important sources of employee motivation. With a little creativity, small businesses can provide meaningful rewards that motivate employees without breaking the bank. Often the most meaningful motivating factors are the simplest—and least costly—ones, such as praise, recognition, respect, feedback, job security, and promotions. When an employee has done an exceptional job, an entrepreneur should be the first to recognize that accomplishment and to say “thank you.” Praise is a simple and powerful motivational tool. “Praise is the most powerful driver of performance known to

mankind,” says Bob Nelson, a workplace consultant.82 People enjoy getting praise and recognition; it is just human nature. As Mark Twain once said, “I can live for two months on a good compliment.

One sure way to kill high performance is failing to recognize the performance and the employees responsible for it. Failing to praise good work eventually conveys the message that the owner either doesn’t care about exceptional performance or cannot distinguish between good work and poor work. In either case, through inaction, the manager destroys employees’ motivation to excel. Rewards do not have to be expensive to be effective, but they should be creative and should have a direct link to employee performance. Consider how the following rewards for exceptional performance both recognize the employee’s contribution and build a positive organizational culture:

• Frima Studio, a video game development company, recognizes creative ideas from employees with “Frima Points,” which contributors can trade in for payment for babysitters, home repair services, and other things that enhance work–family balance—a core value for Frima Studio.84

• Beryl, a call-center company based in Texas, throws a pizza party when the company meets its monthly goals.85

• The AAA Fair Credit Foundation in Salt Lake City, Utah, involves all of its employees in rewarding excellent performance. Employees recognize the extra efforts and special accomplishments of their coworkers by recommending them for “Dollar Days.” When an employee earns eight Dollar Days, he or she cashes them in for a day off.

Whatever system of rewards they use, entrepreneurs will be most successful if they match rewards to employees’ interests and tastes. For instance, the ideal reward for one employee might be tickets to a sports event; to another, it might be tickets to a theatrical performance. The better entrepreneurs know their employees’ interests and tastes, the more effective they will be at matching rewards with performance.

As Generation Y enters the workforce, entrepreneurs will rely more on nonmonetary rewards—praise, recognition, letters of commendation, and others—to create a work environment that fits what this generation values. Under this system, employees enjoy what they do and find their work challenging, exciting, and rewarding. The benefit to the company is that these employees are more likely to act like owners of the business themselves. The goal of nonmonetary rewards is to let employees know that every person is important and that the company notices, appreciates, and recognizes excellent performance.