CHAPTER OVERVIEW
We have presented a number of motivation theories and applications in this and the previous chapter. While it is always dangerous to synthesize a large number of complex ideas into a few simple guidelines, the following suggestions summarize the essence of what we know about motivating employees in organizations.
Recognize individual differences. Employees have different needs. Do not treat them all alike. Moreover, spend the time necessary to understand what is important to each employee. This will allow you to individualize goals, level of involvement, and rewards to align with individual needs.
Use goals and feedback. Employees should have hard, specific goals, as well as feedback on how well they are faring in pursuit of those goals.
Allow employees to participate in decisions that affect them. Employees can contribute to a number of decisions that affect them: setting work goals, choosing their own benefits packages, solving productivity and quality problems, and the like. This can increase employee productivity, commitment to work goals, motivation, and job satisfaction.
Link rewards to performance. Rewards should be contingent on performance. Importantly, employees must perceive a clear linkage. Regardless of how closely rewards are actually correlated to performance criteria, if individuals perceive this relationship to be low, the results will be low performance, a decrease in job satisfaction, and an increase in turnover and absenteeism statistics.
Check the system for equity. Rewards should also be perceived by employees as equating with the inputs they bring to the job. At a simplistic level, this should mean that experience, skills, abilities, effort, and other obvious inputs should explain differences in performance and, hence, pay, job assignments, and other obvious rewards.
WEB EXERCISES
At the end of each chapter of this instructor's manual you will find suggested exercise and ideas for researching the WWW on OB topics. The exercises "Exploring OB Topics on the Web" are set up so that you can simply photocopy the pages, distribute them to your class, and make assignments accordingly. You may want to assign the exercises as an out-of-class activity or as lab activities with your class. Within the lecture notes the graphic will note that there is a WWW activity to support this material.
The chapter opens with the new compensation system implemented by the accounting firm of J.H. Cohn. Traditionally, accounting firms have based compensation in large part on seniority. Cohn, however, has modified its compensation program to reflect pay for performance. Cohn's CEO, Tom Marino, sees performance based pay as helping motivate younger partners to build the business. It provides incentive and rewards performance.
BRIEF CHAPTER OUTLINE
Management by Objectives
Instructor Note: At this point in the lecture you may want to introduce the TEAM EXERCISE - Goal Setting Task found in the text and at the end of these chapter notes. The purpose of the exercise is to learn how to write tangible, verifiable, measurable, and relevant goals as might evolve from an MBO program.
Employee Recognition Programs
Employee Involvement Programs
Instructor Note: At this point in the lecture you may want to introduce the POINT-COUNTER POINT - The Power of Stock Options As A Motivator found in the text and at the end of these chapter notes. A suggestion for a class exercise follows the introduction of the material.
Job Redesign and Scheduling Programs
Variable Pay Programs
Instructor Note: At this point in the lecture you may want to introduce the CASE INCIDENT - When the Perks Fade found in the text and at the end of these chapter notes. A suggestion for a class exercise follows the introduction of the material.
Instructor Note: At this point in the lecture you may want to introduce the ETHICAL DILEMMA EXERCISE - Are American CEO's Paid Too Much? box found in the text and at the end of these chapter notes. A suggestion for a class exercise follows the introduction of the material.
Instructor Note: At this point in the lecture you may want to introduce the OB IN THE NEWS - Pay for Performance at Siebel Systems box found in the text and below. A suggestion for a class exercise follows the introduction of the material below.
Skilled-Based Pay Plans
Flexible Benefits
EXPANDED CHAPTER OUTLINE
Management by Objectives
The objectives in MBO should be concise statements of expected accomplishments. Example - To cut departmental costs by seven percent, to improve service by ensuring that all telephone orders are processed within 24 hours of receipt, or to increase quality by keeping returns to less than one percent of sales.
MBO seeks to give continuous feedback on progress toward goals so that workers can monitor and correct their own actions.
The only area of possible disagreement with goal setting theory is participation-MBO strongly advocates it. Goal-setting theory-assigning goals to subordinates-frequently works just as well participation.
Instructor Note: At this point in the lecture you may want to introduce the TEAM EXERCISE - Goal Setting Task found in the text and at the end of these chapter notes. The purpose of the exercise is to learn how to write tangible, verifiable, measurable, and relevant goals as might evolve from an MBO program.
Employee Recognition Programs
Employee Involvement Programs
Dozens of studies have been conducted but the findings are mixed. It appears that participation typically has only a modest influence on productivity, motivation, and job satisfaction.
If one were interested in changing employee attitudes or in improving organizational performance, representative participation would be a poor choice.
Instructor Note: At this point in the lecture you may want to introduce the POINT-COUNTER POINT - The Power of Stock Options As A Motivator found in the text and at the end of these chapter notes. A suggestion for a class exercise follows the introduction of the material.
Employee involvement draws on a number of the motivation theories previously discussed:
Job Redesign and Scheduling Programs
Self-Assessment Exercise
Job Enrichment
Instructor Note: Students should complete the Self-Assessment Exercise from SAL #19 "Do I Want an Enriched Job?" The results from this exercise directly relate to the chapter material.
Students should consider the following after they have completed the exercises:
Instructor Note: At this point in the lecture you may want to introduce the MYTH OR SCIENCE? "Everyone Wants a Challenging Job"" found in the text and at the end of these chapter notes. The discussion of the material will provide students the opportunity to discuss how managers should determine whether individuals desire more challenging jobs.
MYTH OR SCIENCE? - Everyone Wants a Challenging Job
This statement is false. In spite of all the attention focused by the media, academicians, and social scientists on human potential and the needs of individuals, there is no evidence to support that the vast majority of workers want challenging jobs. Some individuals prefer highly complex and challenging jobs; others prosper in simple, routinized work.
The individual-difference variable that seems to gain the greatest support for explaining who prefers a challenging job and who doesn't is the strength of an individual's higher-order needs. Individuals with high growth needs are more responsive toe challenging work. But what percentage of rank-and-file workers actually desire higher-order need satisfactions and will respond positively to challenging jobs? No current data are available, but a study from the 1970's estimated the figure at about 15 percent. Even after adjusting for changing work attitudes and the growth in white-collar jobs, it seems unlikely that the number today exceeds 40 percent.
The strongest voice advocating challenging jobs has not been workers-it's been professors, social-science researchers, and journalists. Professors, researchers, and journalists undoubtedly made their career choices, to some degree, because they wanted jobs that gave them autonomy, identity, and challenge. That, of course, is their choice. But for them to project their needs onto the workforce in general is presumptuous.
Not every employee is looking for a challenging job. Many workers meet their higher-order needs off the job. There are 168 hours in every individual's week. Work rarely consumes more than 30 percent of this time. That leaves considerable opportunity, even for individuals with strong growth needs, to find higher-order need satisfaction outside the workplace.
Class Exercise:
Linking Job Redesign and Scheduling to Motivation Theories
Variable Pay Programs
Instructor Note: At this point in the lecture you may want to introduce the CASE INCIDENT - When the Perks Fade found in the text and at the end of these chapter notes. A suggestion for a class exercise follows the introduction of the material.
Instructor Note: At this point in the lecture you may want to introduce the ETHICAL DILEMMA EXERCISE - Are American CEO's Paid Too Much? box found in the text and at the end of these chapter notes. A suggestion for a class exercise follows the introduction of the material.
Instructor Note: At this point in the lecture you may want to introduce the OB IN THE NEWS - Pay for Performance at Siebel Systems box found in the text and below. A suggestion for a class exercise follows the introduction of the material below.
OB IN THE NEWS - Pay for Performance at Siebel Systems
Executives at Siebel Systems, the sales automation software firm headquartering in San Mateo, California, understand how rewards shape behavior. They have scrapped their traditional system of rewarding their sales people solely on the basis of how well they achieve their sales targets. They have replaced it with a new motivation system that broadens the definition of sales performance to include building long-term customer satisfaction.
Siebel considers building long-term customer relationships to be its top priority. Says the company's vice president of technical services, Steve Mankoff: "[If reps] close a contract with a customer, continue to follow up with that customer, and make sure that customer is successful, chances are that customer will come back for more. In any given quarter, 45 to 60 percent of our business is from repeat customers."
So now nearly 40 percent of each salesperson's incentive compensation is based on their customer's reported satisfaction with service and implementation of the products they have purchased. To determine how well its salespeople are doing, Siebel regularly surveys customers on the responsiveness of its sales organization, the sales consultant's ability to integrate a customer's requirements with Siebel's software solutions, the rep's knowledge of the products and of the customer's project, and ease of purchasing and contracting.
By broadening pay for performance from just generating sales to also including customer satisfaction, Siebel is getting its sales force to focus on the needs of its customers. "It works," says Mankoff. "Our loyalty rate among customers is in the 96 to 99 percent range."
Class Exercise:
Skilled-Based Pay Plans
Flexible Benefits
Drawbacks for the organization are that these plans are more cumbersome for management to oversee, and administering the programs is often expensive.
Self-Assessment Exercise
Motivation
Instructor Note: Students should complete the Self-Assessment Exercise from SAL #18 "What's My Job Motivating Potential?" You can use student results to discuss applications of the various motivation theories.
Students should consider the following after they have completed the exercises:
POINT-COUNTERPOINT - The Power Of Stock Options As A Motivator
POINT
Professional employees are different than your average employee. And they're more difficult to motivate. Why? Because professionals don't respond to the same stimuli that nonprofessionals do.
Professionals like engineers, accountants, lawyers, nurses, and software designers are different from nonprofessionals. They have a strong and long-term commitment to their field of expertise. Their loyalty is more often to their profession than to their employer. And typical rewards, like money and promotions, are rarely effective in encouraging professionals to exert high levels of effort.
Professionals see their allegiance to their profession, not to the organization that employs them. A nurse, for instance, may work for Mercy Hospital but she reads nursing journals, belongs to nursing associations, attends nursing conferences, and hangs around with other nurses during her breaks at work. When asked what she does for a living, she's more apt to respond, "I'm a registered nurse" than "I work at Mercy Hospital."
Money and promotions are typically low on the professional's priority list. Why? Because they tend to be well paid already and they enjoy what they do. For instance, professionals are not typically anxious to give up their work to take on managerial responsibilities. They've invested a great deal of time and effort in developing their professional skills. They've typically gone to professional schools for several years and undergone specialized training to build their proficiencies. They also invest regularly-in terms of reading, taking courses, attending conferences, and the like-to keep their skills current. Moving into management often means cutting off their ties to their profession, losing touch with the latest advances in their field, and having to let the skills that they've spent years developing become obsolete.
This loyalty to the profession and less interest in typical organizational rewards makes motivating professionals more challenging and complex. They don't respond to traditional rewards. And because they tend to give their primary allegiance to their profession rather than their employer, they're more likely to quit if they're dissatisfied. As an employer, you might be justified in deciding not to exert the effort to develop and keep professionals because they're unlikely to reciprocate loyalty efforts you make.
COUNTERPOINT
Let's first address the question of whether professionals with advanced degrees are really that different from nonprofessionals. One of the differences often cited regarding professionals is their allegiance to their profession. But this isn't unique to the so-called "degreed professionals." For instance, plumbers, electricians, and similar trades people aren't considered professionals but they typically see themselves as affiliated to their trade or union rather than their employer. Similarly, many auto workers at Ford and GM give their primary allegiance to the United Auto Workers union.
Even if you accept that professionals are different than nonprofessionals, these differences may make it easier to motivate professionals rather than harder. For a large proportion of professionals, their work is their life. They rarely define their workweek in terms of 8 to 5 and five days a week. Working 60 hours a week or more is often common. They love what they do and often prefer to be working rather than doing anything else. So as long as they enjoy their work, they're likely to be self-motivated.
What factors are likely to determine if they enjoy their work? Job challenge tends to be ranked high. They like to tackle problems and find solutions. They prefer jobs that score high on the job characteristics model; that is, they want jobs that provide variety, identity, significance, autonomy, and feedback. Professionals also value support, recognition, and opportunities to improve and expand their professionals' expertise.
So how do you motivate professionals? Provide them with ongoing challenging projects. Give them autonomy to follow their interests and allow them to structure their work in ways that they find productive. Provide them with lateral moves that allow them to broaden their experience. Reward them with educational opportunities-training, workshops, attending conferences-that allow them to keep current in their field. Additionally, reward them with recognition. And consider creating alternative career paths that allow them to earn more money and status, without assuming managerial responsibilities. At Merck, IBM, and AT&T, for instance, the best scientists, engineers, and researchers gain titles such as fellow and senior scientist. They carry pay and prestige comparable to those of managers but without the corresponding authority or responsibility.
QUESTIONS FOR REVIEW
1. Relate goal-setting theory to the MBO process. How are they similar? Different?
Answer - Management by objectives emphasizes participatively set goals that are tangible, verifiable, and measurable. It is not a new idea. Linking MBO and goal-setting theory:
Goal-setting theory demonstrates that:
MBO
The only area of possible disagreement is participation.
2. What is an ESOP? How might it positively influence employee motivation?
Answer - ESOPs are company-established benefit plans in which employees acquire stock as part of their benefits. In the typical ESOP, an employee stock ownership trust is created. Companies contribute either stock or cash to buy stock for the trust and allocate the stock to employees. Employees usually cannot take physical possession of their shares or sell them as long as they are still employed at the company. The research indicates that ESOPs increase employee satisfaction, but their impact on performance is less clear. One study compared 45 ESOPs against conventional companies. The ESOPs outperformed the conventional firms both in terms of employment and sales growth, but other studies have shown disappointing results. The evidence consistently indicates that it takes ownership and a participative style of management to achieve significant improvements in an organization's performance.
3. Explain the roles of employees and management in quality circles.
Answer - Probably the most widely discussed and undertaken formal style of employee involvement is management in quality circles. It is a work group of eight to ten employees and supervisors who have a shared area of responsibility. They meet regularly on company time to discuss their quality problems, investigate causes of the problems, recommend solutions, and take corrective actions. They take over the responsibility for solving quality problems, and they generate and evaluate their own feedback. Management typically retains control over the final implementation decision. Exhibit 7-3 describes a typical quality circle process.
4. What are the pluses of variable-pay programs from an employee's viewpoint? From management's viewpoint?
Answer - Variable pay offers bigger rewards and ties rewards to work. For management, it reduces cost because pay is tied to productivity and eliminates or reduces permanent increases in labor costs.
5. Contrast job-based and skill-based pay.
Answer - Rather than job title defining one's pay (as in job-based pay), one's competency (or the number and level of skills one has) determines pay levels.
6. What is gain sharing? What explains its recent popularity?
Answer - This is a formula-based group incentive plan. Improvements in group productivity-from one period to another-determine the money allocated. Gain sharing and profit sharing are similar but not the same thing. Gainsharing rewards specific behaviors that are less influenced by external factors. Employees in a gainsharing plan can receive incentive awards even when the organization is not profitable.
Studies generally support that organizations with profit-sharing plans have higher levels of profitability than those without. Gain sharing has been found to improve productivity in a majority of cases and often has a positive impact on employee attitudes.
7. What are the advantages of flextime from an employee's perspective? From management's perspective?
Answer - Employee perspective-can schedule work hours to align with personal demands; Management's perspective-reduces absenteeism and frequently improves worker productivity; lessens hostility toward management and may increase employee job satisfaction.
8. What are the advantages of job sharing from an employee's perspective? From management's perspective?
Answer - Employee perspective-increases flexibility particularly where a 40 hour a week job isn't practical. Management perspective-allows the organization to draw on the talents of more than one individual in a given job. Opens up the opportunity to acquire skilled workers who might not be available on a full-time basis.
9. What role, if any, does money play in MBO, employee recognition, job redesign, and skill-base pay?
Answer - Money is remuneration and could be set on a pay for performance basis in any of the programs listed here. It is usually not necessary for employee recognition. However, where jobs are redesigned and include more tasks, money would be appropriate.
10. What can you do, as a manager, to increase the likelihood that your employees will exert a high level of effort?
Answer - Check the system for equity. Rewards should also be perceived by employees as equating with the inputs they bring to the job. At a simplistic level, this should mean that experience, skills, abilities, effort, and other obvious inputs should explain differences in performance and, hence, pay, job assignments, and other obvious rewards.
QUESTIONS FOR CRITICAL THINKING
1. Identify five different criteria by which organizations can compensate employees. Based on your knowledge and experience, do you think performance is the criterion most used in practice? Discuss.
Answer - Seniority, position, merit, skill, and productivity/performance. Students' responses will vary; generally, there is a great deal of discussion of performance pay in the literature and among managers. The key issue is whether employees perceive the compensation-performance linkage, regardless of what management implements.
2. "Recognition may be motivational for the moment but it does not have any staying power. It is an empty reinforcer. Why? Because when you go the grocery store, they do not take recognition as a form of payment!" Do you agree or disagree? Discuss.
Answer - Students' answers may vary more due to the personalities than facts. Some people never forget being recognized once, others look for continual recognition. Keys to remember in the discussion include the following: The best recognition programs use multiple sources and recognize both individual and group accomplishments. Employees consider recognition to be the most powerful workplace motivator. Consistent with reinforcement theory, rewarding a behavior with recognition immediately following that behavior is likely to encourage its repetition.
3. "Performance cannot be measured, so any effort to link pay with performance is a fantasy. Differences in performance are often caused by the system, which means the organization ends up rewarding the circumstances. It is the same thing as rewarding the weather forecaster for a pleasant day." Do you agree or disagree with this statement? Support your position.
Answer - Performance measurement can be difficult depending on the type of job being evaluated. The key is to try to control for those factors that employees cannot control, measure, and reward those that employees can control. Also, building in base income in an incentive system helps smooth the dips that come due to factors beyond employee control.
4. It is an indisputable fact that there has been an explosive increase in the difference between the average U.S. worker's income and those of senior executives. In 1980, the average CEO made 42 times the average blue-collar worker's pay. In 1990, it was 85 times. In 2000, it had risen to 531 times. What are the implications of this trend for motivation in organizations?
Answer - Students will have varying opinions on this. Given recent corporate scandals involving CEO's who took millions at the expense of employees' retirement accounts they should take into account such factors as trust, employee retention, productivity, efficiency, etc.
5. This book argues for recognizing individual differences. It also suggests paying attention to members of diversity groups. Is this contradictory? Discuss.
Answer - There is no inherent contradiction because both approaches seek to treat people as individuals. Sensitivity to diversity is not sensitivity to a group, but to the individual within the group.
TEAM EXERCISE - Goal-Setting Task
Purpose: This exercise will help you learn how to write tangible, verifiable, measurable, and relevant goals as might evolve from an MBO program.
Time: Approximately 20 to 30 minutes
Instructions:
Teaching notes:
ETHICAL DILEMMA EXERCISE - Are American CEOs Paid Too Much?
Critics have described the astronomical pay packages given to American CEO's as "rampant greed." They note, for instance, that during the 1990s, corporate profits rose 108 percent. During this same period, workers' pay rose only 28 percent. Yet CEO pay rose 481 percent! In the year 2000, the average CEO of a major American corporation made 531 times as much as the average factory worker. If the average production workers' pay had increased at the same rate as CEO pay during this period, worker pay would be $110,399 today rather than $29,267.
High levels of executive compensation seem to be widely spread in the United States. In 2000, for instance, John Chambers of Cisco Systems took home $157.3 million; General Electric's Jack Welch was paid $122.6 million; and Coca-Cola's Douglas Daft earned $91.7 million. These figures were for pay and exercised stock options only. They do not include potentially hundreds of millions more from appreciated value of unexercised stock options. Twenty-five years ago,
