Calisthenics

The CASE Journal Calling Dr. Fun: The struggle to implement a motivating reward system in a small S-corporation Kathleen P. Hess

Article information: To cite this document: Kathleen P. Hess , (2011),"Calling Dr. Fun: The struggle to implement a motivating reward system in a small S-corporation", The CASE Journal, Vol. 8 Iss 1 pp. 5 - 18 Permanent link to this document: http://dx.doi.org/10.1108/TCJ-08-2011-B002

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Volume 8, Issue 1 (Fall 2011)

Kathleen P. Hess, Salem State University

As Susan sat in her large but cluttered office she could vividly recall her first bonus. It had been

years ago; she had begun working part time at Tampani, Inc. less than a year before that while

she finished her dissertation. At the time Tampani was still a small start-up (she was the 11th

employee), and she did not think that such a small company could afford to give bonuses to its

employees. One day while she was sitting in her office, which she affectionately called “the

cave” because it was so small and dark, one of her bosses, Karen, came into her office and told

her that she was being rewarded for the great work she was doing for the company. Karen

handed Susan a check for just over $200. Susan was absolutely thrilled! She did not really

understand why she got the bonus, but it felt good to be recognized for her hard work. Unable to

contain her excitement Susan decided to tell her husband, Michael, the good news (he had been

hire number 10). She burst into his office, and turned the corner to reach his desk without even

taking the time to notice the view out his prized “wall of windows,” but before she could tell him

about her $200 bonus Michael proudly showed her his bonus check of over $1000. Susan was

crushed – and still she did not fully understand why either of them had gotten the bonuses or how

the bonuses were determined.

In the years that followed, Michael had left Tampani to work for a large high-tech company, and

Susan had worked her way up at Tampani to become the company’s “Quality of Life

Coordinator.” In this position Susan served as liaison between management and the employees,

fielding questions and concerns from the employees and devising solutions to suggest to

management. Susan was good at her job. She was respected and liked by everyone in

management and all of the employees; they had given her the nickname “Dr. Fun” because of her

ability to keep the culture of the company enjoyable for everyone – whether they were in

management or first-level employee. She consistently found amicable solutions before issues

became full-blown conflicts. Lately Susan had been receiving a lot of questions and concerns

regarding Tampani’s incentive program. Earlier in the month Tom had complained about the

distribution of stock options – he was one of the most productive employees, winning larger

contracts than any other single employee, yet he was regularly overlooked when it came to stock

option allocation. It became clear to Susan that employees still did not understand how bonuses

and other incentives were decided upon and that many employees found this uncertainty to be

stressful. Tampani had such a history of ambiguous rewards that Susan was just not sure what

could be done to rectify the situation.

Calling Dr. Fun: The struggle to implement a motivating reward system in a small S- Corporation1

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The CASE Journal Calling Dr. Fun

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COMPANY BACKGROUND

In 1995, David, an M.B.A. and an Aeronautical Engineer, partnered with Bev, an M.B.A. in

Accounting, to start a research, development, and engineering company that would provide

“human-centered” solutions to complex problems such as those encountered by the US military.

It was David’s vision to integrate social science and engineering to produce new knowledge and

new technologies that would optimize the fit between people, the technology they used, and the

organizations in which they worked. At the time, both David and Bev were working for a small

company, Plathe, Inc., founded by and populated with engineers from MIT. The engineers at

Plathe developed large computer systems primarily for military customers. David was one of the

few employees who investigated the human side of these systems, collecting data to inform the

design of these systems so that the user could get optimal performance from the systems. Bev

was one of Plathe’s accountants. Both David and Bev liked the work they were doing, but neither

of them liked the culture of the company. They found it to be too bureaucratic and cutthroat.

Plathe’s reward system consisted of bonuses, raises, and promotions that were allocated more for

political reasons than to reward hard work or to encourage good performance. The engineers in

upper management did not recognize the importance of David’s work, which focused more on

people than technology, so he realized that advancement at Plathe was unlikely. Bev, David’s

friend, recognized the inherent unfairness of the system and could see the potential in David’s

interest in “human-centered” engineering. Together they vowed to create a new company and

make it a better place to work.

TAMPANI, INC.

Tampani, Inc., began modestly in one room with one desk and one phone shared by five people:

David, Bev, Doug (a computer programmer), and two part-time human factors and systems

engineers (together considered the fourth employee), Dora and Dana. Soon another full time

employee, Karen, joined the team. All six company employees were old friends who had worked

together at Plathe and they were all motivated to do whatever was necessary to make the

fledgling company survive and thrive.

Tampani had its roots in team research for military customers. While David was doing his

graduate work at the University of Connecticut, he and others developed a computer simulator

that allowed researchers to diagnose performance issues in team decision making, such as

improper allocation of resources or distribution of workload, so they could improve the team

processes. Just as David and Doug were continuing the development of this simulator at

Tampani, several military research and development labs were looking for just such a system to

use as a team development tool. Five years later, the majority of Tampani’s funding still came

from a portfolio of government contract vehicles, including government-wide acquisition

contracts and indefinite delivery/indefinite quantity (ID/IQ) task order contracts – many of them

utilizing the original computer program in one form or another. As Tampani grew, its repertoire

of projects grew as well. By the time Susan became the Quality of Life Coordinator, Tampani

had approximately 28 employees and a mix of projects involving training and software

development to satisfy each customer’s unique and diverse needs. Although the employees

working at Tampani were not all “old friends” before they were hired, once they began working

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The CASE Journal Calling Dr. Fun

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there they were made to feel like part of the Tampani “family” – very unlike the climate Bev and

David left behind at Plathe.

COMPANY PHILOSOPHY AND MISSION

Tampani specialized in solving human performance problems that occurred in complex

sociotechnical systems (see Exhibit 1 for a description of Sociotechnical Systems) such as the

US military. They would design organizations, user-centered technology, and training systems to

make individuals and teams more effective using a unique approach – human-centered

engineering – that coupled the principles of social science with quantitative, computational

methods. Tampani’s mission, which highlighted its dedication to the employees, was as follows:

• Enhance the fit between human beings and their work environments.

• Be the market leader in human-centered engineering by developing and fielding

innovative products, technologies, practices, and services.

• Develop and maintain outstanding relationships with customers through pro-

active support and excellence in the services and products we deliver.

• Establish a working and learning environment that is open-minded, team-

oriented, creative, and enriching to our staff members.

COMPANY OWNERSHIP AND STRUCTURE

Tampani was an S-Corporation (see Exhibit 2 for a description of different types of companies).

By the time Susan became the Quality of Life Coordinator it had approximately twenty-eight

employees; in the years that Susan worked at Tampani it eventually grew to have over 100

employees. Its overall structure was relatively flat with one executive layer of management that

included David, Bev, and Karen, one layer of “division leaders” whose responsibility was to take

the management burden off of executive management, and the remainder of the employees all

worked as “staff members” (see Exhibit 3). Susan was given the position of “Quality of life

Coordinator” to deal with any issues that might arise with the staff members before they escalate.

Informally Susan was called “Dr. Fun.” Her mission was as follows:

To ensure an environment that is maximally conducive to employee growth,

development, and satisfaction by

a) making sure employees have a voice in the growth and development of

Tampani and that they know their voices are heard and heeded,

b) keeping employees informed why specific changes will, or cannot, be made,

c) doing what is necessary to enrich the professional lives of Tampanists for

personal and professional growth and development, and

d) continuously exploring for new and innovative ways to improve Tampani from

an employee’s point of view.

The Quality of Life Coordinator (QOLC) is a voice for the employees in all

dealings at Tampani, and the QOLC will be given the appropriate responsibility

and authority to make sure the employees’ voices are heard. The opinions of the

QOLC on matters that concern employees will be equal to the division leaders;

however, the QOLC will not have the authority to make decisions on her own. If

there is uncertainty about what the employees think about an issue, it is the

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responsibility of the QOLC to survey the employees and make suggestions based

on their opinions. The QOLC understands that there will be times when

employees want something that is not feasible; in that situation, it is the QOLC’s

responsibility to research the issue and report back to the employees how the issue

resolved and why.

TAMPANI’S COMPENSATION SYSTEM AND INCENTIVES

Tampani’s compensation system consisted of competitive, yet modest, wages, yearly bonuses,

and stock options. Bi-annual surveys of employee compensation of businesses similar to

Tampani in size and type of work ensured that employee wages remained competitive.

Allocation of bonuses and stock options were decided by executive management (i.e., David,

Bev, and Karen). The company was housed in a large business complex and every employee had

his/her own fully furnished office, although office size varied considerably and few offices had

windows. The incentive system also included such things as increased responsibility (e.g.,

project management), title changes, and promotions. A career-path trajectory had been developed

for the staff members whereby they could develop a career in either a management/leader role or

as a scientist/researcher role (see Exhibit 4). The actual criteria for advancement up the career

paths were vague and sometimes seemed arbitrary. For example, sometimes project management

was allotted to a person because they were in a project lull and had time to devote to a new

project rather than as a reward or promotion. Also, there were occasions when a person was

given the descriptor “Senior” in their title simply because s/he asked for it rather than as a result

of a promotion.

THE CHALLENGE

After her discussion with Tom about how unfair the allocation of stock options seemed to be,

Susan designed a survey to determine how the employees perceived Tampani’s incentive

program (see survey in Exhibit 5). The survey was totally voluntary and anonymous. Sixteen

employees returned completed surveys. The survey results can be found in Exhibit 6.

Susan also talked to Bev, Tampani’s CFO, about the allocation of stock options. Bev explained

that stock options had been used as general incentives when the company was very small – but

given their S-Corporation status, and the limitations that S-Corporations have regarding the

number of stockholders they can have, this became unrealistic as the company continued to

grow. By the time Tom complained to Susan about being passed over for this incentive,

executive management had decided that they could no longer give stock options to employees

who did not already own some. Stock options could be used to reward only those employees who

already owned stock in the company. Unfortunately this created some confusion and resentment

among the employees like Tom who were left out of this incentive program for what they

perceived to be arbitrary reasons.

Susan studied the survey results, and thought about her conversation with Bev, uncertain about

how to proceed. She knew that something needed to be done quickly to keep employees

motivated and engaged in their work – but what could it be?

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ENDNOTES

1 All names of people and companies have been changed.

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The CASE Journal Calling Dr. Fun

Volume 8, Issue 1, (Fall 2011)

Exhibit 1: Description of Sociotechnical Systems

Sociotechnical is a term that was coined in the 1960’s (see the early informative book written by

De Greene in 1973). The word is simply the combination of the words “social” and “technical.”

The reason that these two terms have been combined is that people who make a living trying to

understand and improve systems (i.e., organizations or organisms) realize that focusing on just

the social aspect, or just the technical aspect, would result in a less than optimal solution. In

every system there is an interaction between the social and technical aspects such that neither

aspect can be fully understood in the absence of the other. Furthermore, an even more important

result of this tight interconnectedness is that any changes made to the technical aspect of a

system will profoundly affect the social aspect, and any changes made to the social aspect of a

system will profoundly affect the technical aspect.

Consider the following example from an article written by Trist and Bamforth (1951) that is

thought to have started our quest of sociotechnical solutions. Trist and Bamforth were

consultants hired to improve productivity among coal workers. Management had made some

organizational changes (i.e., technical changes) in an attempt to increase productivity but did not

understand why the workers’ performance did not improve. Trist and Bamforth determined that

there were conflicts between the different types of coal workers that were keeping them from

being as productive as they might. The consultants suggested that the workers be trained “for

more than one role…[so that they] could experience each other’s situations [and thus] mutual

understanding and tolerance would be likely to increase” (p. 38). Until mutual understanding and

tolerance (social aspects) increased, Trist and Bamforth felt that productivity would continue to

suffer despite repeated attempts to improve the technical aspects of the job.

REFERENCES

De Greene, K.B. (1973). Sociotechnical systems: factors in analysis, design, and management.

Englewood Cliffs, NJ: Prentice-Hall.

Trist, E. & Bamforth, K. (1951). Some social and psychological consequences of the longwall

method of coal getting. Human Relations, 4, 3-38.

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The CASE Journal Calling Dr. Fun

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Exhibit 2: Different types of companies

As described in countless textbooks (e.g., Ferrell, Hirt, & Ferrell, 2009; Nickels, McHugh, &

McHugh, 2008) and at the US Small Business Administration website

(http://www.sba.gov/smallbusinessplanner/start/chooseastructure/START_FORMS_OWNERSH

IP.html) there are many different types of businesses in the United States. They differ in ways

such as ownership structure, taxation requirements, and owner liability. Some of the more

common include the following:

Sole Proprietorship: The business is owned by one person. The owner is taxed as an

individual – s/he must pay taxes on the company’s profits. The owner has unlimited

liability; this means that the owner could lose personal belongings, like his/her house, if

the business fails and the owner owes money.

Partnership: The business is owned by more than one person. There are no special tax

provisions so the owners must pay taxes just on the business’ profits. Owners’ liability

depends on the type of partner an owner is; a general partner has unlimited liability

whereas a limited liability partner is only liable for money s/he has invested (although a

limited liability partner has little to no say in how the company is managed and run)

Franchise: Similar to a sole proprietorship (e.g., in taxation and liability) but the owner

pays a franchise owner (franchisor) for the use of the company’s name (e.g.,

McDonalds), the owner must follow specific rules and regulations about the products and

even running the business, and the owner must share the profits with the franchisor.

Corporation: The business is owned by many people; every person who owns even one

share of its stock is considered an owner. The owners have limited liability; they can only

lose the money they have invested in the company by buying shares of stocks. There are

different kinds of corporations – two of which are C-Corporations (“conventional”

corporations) and S-Corporations (“subchapter” corporations). One main difference

between these corporation types is how they are taxed; C-Corporation profits are double

taxed – taxes are paid on profits when they are made, and taxes are paid on profits when

they are dispersed to the owners (stockholders) in the form of dividends (C-Corporations

are not double-taxed; the corporation is taxed once and the stockholders are taxed once),

whereas S-Corporation profits are taxed only once. Another main difference between C-

and S-Corporations relates to the number of owners, or stockholders, the corporation can

have. S-Corporations are limited to 100 owners; C-Corporations have no such limitation.

REFERENCES

Ferrell, O.C., Hirt, G., & Ferrell, L. (2009). M: Business w/Review Cards & OLC Access Card,

1st Edition. New York, NY: McGraw-Hill/Irwin.

Nickels, McHugh, & McHugh (2008). Understanding Business, 8th edition. New York, NY:

McGraw-Hill/Irwin.

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The CASE Journal Calling Dr. Fun

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Exhibit 3: Organizational Structure of Tampani in 2000

Source: The Company’s Archives

President and Founder

David

Principal Scientist

Karen

Chief Financial Officer

Bev

Division 1 Leader

Division 3 Leader

Division 4 Leader

Division 2 Leader

Staff Members (including the Quality of Life Coordinator)

Staff Members Staff Members Staff Members

St af

f M

an ag

em e

n t

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The CASE Journal Calling Dr. Fun

Volume 8, Issue 1, (Fall 2011)

Exhibit 4: Career-path trajectories for both a management/leader role and a scientist/researcher role

Source: The Company’s Archives

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The CASE Journal Calling Dr. Fun

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Exhibit 5: Motivation Survey Please rate the following:

Rating #1 how motivating each of the following are to you,

Rating #2 how successful you feel Tampani is at providing it for you, and

Rating #3, for those of you who have been at Tampani long enough, how has Tampani

changed in providing it for you.

Do NOT put your name on this – it is totally anonymous and voluntary. Please put completed

questionnaires in the large brown “Questionnaires” envelope by the mailboxes by Thursday 3pm.

Rating #1: How motivating is

this to you?

Rating #2: How successful is

Tampani at providing this for

you?

Rating #3: How has Tampani

changed in providing this for

you?

1 Very Unmotivating

2

3

4 Neither Motivating nor

Unmotivating

5

6

7 Very Motivating

1 The Opposite is Provided

2

3

4 Neither It nor Its Opposite is

provided

5

6

7 Tampani Provides Fully

1 gotten worse

2

3

4 no change

5

6

7 improved immensely

Motivating Factor Rating #1 Rating #2 Rating #3

Money and benefits

Salary competitive with other companies for similar work and

experience

Salary above competitive salary

Benefits (e.g., medical, vacation/holiday/sick, etc.)

[other]

Physical Work Space

Nice office

Big office

Office with windows

Private office (office to myself)

Cubicle as an office

Big, fast, monster computer

[other]

Individual Growth

Bonus allocation based on my individual (not as part of a team)

performance

Recognition for my ideas and work

Autonomy

Responsibility

Challenge

Feedback on performance

Freedom to do my work my way

Clarity of job requirements (instead of ambiguity)

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The CASE Journal Calling Dr. Fun

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Rating #1: How motivating is

this to you?

Rating #2: How successful is

Tampani at providing this for

you?

Rating #3: How has Tampani

changed in providing this for

you?

1 Very Unmotivating

2

3

4 Neither Motivating nor Un

5

6

7 Very Motivating

1 The Opposite is Provided

2

3

4 Neither It nor Its Opposite

5

6

7 Tampani Provides Fully

1 gotten worse

2

3

4 no change

5

6

7 improved immensely

Motivating Factor Rating #1 Rating #2 Rating #3

Leading Projects

Professional reputation (i.e., recognition outside of Tampani)

Professional development (e.g., conferences, tuition

reimbursement)

Publications

Making Conference Presentations

Travel

Involvement in early stage of proposal or project

Choosing the projects on which I will work

Having evenings and weekends for myself, friends, and family

[other]

Individual Survival

Flexibility to commute on non-peak traffic hours

Time to get my project work done

Personal time (several hours a week when no one bothers me)

Free snacks and sodas

Fun with coworkers outside of work (e.g., summer outing,

parties, other activities)

In house diversions

[other]

Growth as a team

Bonus allocation based on performance as part of a team

Co-workers who are friends and colleagues

Collaboration with co-workers

Cooperative work environment

Competition within Tampani

Competition with organizations outside of Tampani

[other]

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Specific Part-time Issues

Flexibility in number of hours worked

Flexibility in when the hours are worked

Comparable benefits and perks (although pro-rated)

Challenging career opportunities for part-timers

General positive attitude toward part-timers

[other]

Source: The Company’s Archives

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Volume 8, Issue 1, (Fall 2011)

Exhibit 6: Survey Results Results from the Motivation Survey

This is a brief summary of the results of this year’s motivation survey. Susan chose an informal

descriptive method to look at the results because it is more informative with such a small N

(n 16) than inferential statistics. Scores 1, 2, and 3 were combined as being below a neutral

score (“not” or “no”); scores 5, 6, and 7 were combined as being above a neutral score (“very” or

“yes”).

Motivating Factor

How

motivating is

this to you?

Is it provided

by Tampani?

Has Tampani changed

in providing it?

Money and Benefits

Competitive salary 81% very 81% yes

13% no

94% no change

6% gotten worse

More than competitive salary 71% very 43% yes

14% no

100% no change

Benefits 88% very 94% yes 100% no change

Physical Work Space

Nice Office 88% very 87% yes 100% no change

Big Office 53% very 79% yes

7% no

Not measured before

Office with windows 93% very 87% yes improved

Private Office 88% very 69% yes Not measured before

Cubicle 87%

unmotivating

100% not

provided

Not measured before

Computer 56% very 67% yes 100% no change

Individual Growth

Bonus for Individual work 87% very 79% yes improved

Recognition 94% very 88% yes improved

Autonomy 87% very 93% yes 100% no change

Responsibility

100% very 93% yes 13% too much is

provided; worse than

last year

Challenge 100% very 93% yes 100% no change

Feedback 94% very 81% yes

13% no

improved

Freedom in Work 100% very 87% yes 100% no change

Clarity of Job Requirements 73% very 40% no Gotten Worse

Leading Projects 86% very 71% yes 100% no change

Professional Reputation 94% very 75% yes improved

Professional Development 88% very 75% yes 100% no change

Publications 69% very 60% yes

20% no

100% no change

Making Conference Presentations 56% very 69% yes

13% no

100% no change

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The CASE Journal Calling Dr. Fun

Volume 8, Issue 1, (Fall 2011)

Motivating Factor

How

motivating is

this to you?

Is it provided

by Tampani?

Has Tampani changed

in providing it?

Travel Varied

25% yes

31% too much

13% too little

improved

Individual Growth (Continued)

Involvement in early stage of

project

100% very 69% yes

13% no

100% no change

Choosing the work I do 88% very 63% yes

13% no

improved

Having Evenings and Weekends off 100% very 56% yes

44% no

improved

Individual Survival

Flexible commute time 88% very 93% yes 100% no change

Time for project work 100% very 50% no Not measured before

Personal time 67% very 53% no Not measured before

Free Snacks and Sodas 67% very 88% yes Not measured before

Fun with Coworkers 81% very 69% yes

13% no

100% no change

In-house diversions 62% very 31% yes Not measured before

Growth as a Team

Team Bonus 81% very 43% yes

57% no

100% no change

Friends as coworkers 94% very 87% yes 100% no change

Collaboration with Coworkers 100% very 93% yes

7% no

improved

Cooperative work environment 100% very 93% yes

7% no

improved

Competition within Tampani 31% very

50% not

31% too much

13% too little

100% no change

Competition with companies

outside of Tampani

50% very

50% not

64% yes 100% no change

Specific Part-Time Issues

Part-time, flexible number of hours 100% very 80% yes 100% no change

Part-time, flex-time 100% very 80% yes 100% no change

Part-time, comparable benefits 100% very 80% yes 100% no change

Part-time, challenging career 100% very 80% yes 100% no change

General positive attitude toward

part-timers

100% very 100% yes 100% no change

Source: The Company’s Archives

18