Motivating and Rewarding Employees

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Motivating and Rewarding Employees

CHAPTER

10.1

Define and

explain motivation.

Compare and

contrast early theories

of motivation.

10.2

Discuss current issues

in motivating employees.

10.4

10.3

Compare and

contrast contemporary

theories of motivation.

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Best Practices at Best Buy Do traditional workplaces reward long hours instead of efficient hours? Wouldn’t it make more sense to have a workplace in which “people can do whatever they want, whenever they want, as long as the work gets done?” Well, that’s the approach that Best Buy is taking.1 And this radical workplace experiment, which obviously has many implications for employee motivation, has been an interesting and enlightening journey for the company.

In 2002, then-CEO Brad Anderson (now the company’s vice chairman) introduced a carefully crafted program called ROWE (Results-Only Work Environment). ROWE was the inspiration of two HRM managers at Best Buy, Cali Ressler and Jody Thompson (in photo below), who had been given the task of taking a flexible work program that was in effect at corporate headquarters in Minnesota and developing it for everyone in the company. Ressler and Thompson said, “We realized that the flexible work program was successful as employee engagement was up, productivity was higher, but the problem was the participants were being viewed as ‘not working.’ ” And that’s a common reaction from managers who don’t really view flexible work employees as “really working because they aren’t in the office working traditional hours.” The two women set about to change that by creating a program in which “everyone would be evaluated solely on their results, not on how long they worked.”

The first thing to understand about ROWE is that it’s not about schedules. Instead, it’s about changing the work culture of an organization, which is infinitely more difficult than changing schedules. With Anderson’s blessing and support, they embarked on this journey to overhaul the company’s corporate workplace.

The first step in implementing ROWE was a culture audit at company headquarters, which helped them establish a baseline for how employees perceived their work environment. After four months, the audit was repeated. During this time, Best Buy executives were being educated about ROWE and what it was all about. Obvi- ously, it was important to have their commitment to the program. The second phase involved explaining the ROWE philosophy to all the corporate employees and training managers on how to maintain control in a ROWE workplace. In the third phase, work unit teams were free to figure out how to implement the changes. Each team found a different way to keep the flexi- bility from spiraling into chaos. For instance, the public rela- tions team got pagers to make sure someone was always available in an emergency. Some employees in the finance department use software that turns voice mail into e-mail files accessible from anywhere, making it easier for them to work at home. Four months after ROWE was implemented, Ressler and Thompson followed up with another culture check to see how everyone was doing.

So what’s the bottom line for Best Buy? From 2005 to 2007, productivity jumped 41 percent and voluntary turnover fell to 8 percent from 12 percent. And employ- ees say that the freedom has changed their lives. “They don’t know if they work fewer hours—they’ve stopped counting—but they are more produc- tive.” As Ressler and Thompson stated, “Work isn’t a place you go—it’s some- thing you do.”

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Compare and

contrast early theories

of motivation.

10.2

10.1

Define and

explain motivation.

Successful managers understand that what motivates them personally may have little or no

effect on others. Just because you’re motivated by being part of a cohesive work team, don’t

assume everyone is. Or just because you’re motivated by your job doesn’t mean that every-

one is. Effective managers who get employees to put forth maximum effort know how and

why those employees are motivated and tailor motivational practices to satisfy their needs

and wants. Motivating and rewarding employees is one of the most important and challeng-

ing activities that managers do. To get employees to put forth maximum work effort, managers

need to know how and why they’re motivated. That’s what we discuss in this chapter.

What Is Motivation? Several CEOs were attending a meeting where the topic was “What do employ- ees want?”2 Each CEO took turns describing the benefits they provided and how they gave out free M&Ms every Wednesday and offered their employees stock options and free parking spaces. However, the meeting’s main speaker made the point that “employees don’t want M&Ms; they want to love what they

do.” Half expecting his audience to laugh, the speaker was pleasantly surprised as the CEOs stood up one-by-one to agree. They all recognized that “the value in

their companies comes from the employees who are motivated to be there.” These CEOs understand how important employee motivation is. Like them, all man-

agers need to be able to motivate their employees. That requires understanding what motiva- tion is. Let’s begin by pointing out what motivation is not. Why? Because many people incorrectly view motivation as a personal trait; that is, they think some people are motivated and others aren’t. Our knowledge of motivation tells us that we can’t label people that way because individuals differ in motivational drive and their overall motivation varies from situ- ation to situation. For instance, you’re probably more motivated in some classes than in others.

Motivation refers to the process by which a person’s efforts are energized, directed, and sustained toward attaining a goal.3 This definition has three key elements: energy, direction, and persistence.4

The energy element is a measure of intensity or drive. A motivated person puts forth effort and works hard. However, the quality of the effort must be considered as well as its intensity. High levels of effort don’t necessarily lead to favorable job performance unless the effort is channeled in a direction that benefits the organization. Effort that’s directed toward, and consistent with, organizational goals is the kind of effort we want from employ- ees. Finally, motivation includes a persistence dimension. We want employees to persist in putting forth effort to achieve those goals.

Motivating high levels of employee performance is an important organizational concern, and managers keep looking for answers. For instance, a recent Gallup poll found that a large majority of U.S. employees—some 73 percent—are not excited about their work. As the researchers stated, “These employees are essentially ‘checked out.’ They’re sleepwalking through their workday, putting time, but not energy or passion, into their work.”5 It’s no wonder then that both managers and academics want to understand and explain employee motivation.

What Do the Early Theories of Motivation Say? The 1950s and 1960s were a fruitful time for the development of motivation concepts. Four specific theories formulated during this period are probably still the best-known explanations of employee motivation

although they’ve been criticized and questioned. These include the hierarchy of needs theory, Theories X and Y, the two-factor theory, and the three-needs

theory. Although more valid explanations of motivation have been developed,

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percent of workers cited “lack of recognition” as a key reason for leaving a job.

percent of administrative professionals prefer verbal forms of recognition.

percent of organizations say flextime boosts employee morale.

percent of U.S. workers say they “live to work” rather than “work to live.”

percent of French workers say they “live to work.”

40 42 76

percent of Gen Y workers say that they expect to work for two to five employers

during their lifetime. 75

22 16

CHAPTER 10 | MOTIVATING AND REWARDING EMPLOYEES 267

you should know these early theories for at least two reasons. First, they represent the foundation from which contemporary theories grew. Second, practicing managers regularly use these theories and their terminology in explaining employee motivation. Let’s take a look at them.

What Is Maslow’s Hierarchy of Needs Theory? Having a car to get to work is a necessity for many workers. When two crucial employees of Taleo/Vurv Technology in Jacksonville, Florida, had trouble getting to work, the owner decided to buy two inexpensive used cars for the employees. He said, “I felt that they were good employees and a valuable asset to the company.” One of the employees who got one of the cars said, “It wasn’t the nicest car. It wasn’t the prettiest car. But boy did my overwhelming feeling of dread go from that to enlightenment. The 80-hour weeks we worked after that never meant anything. It was give and take. I was giving and the com- pany was definitely giving back.”7 This company understood employee needs (reliable transportation being an essential need for employees to be able to get to work) and their impact on motivation. The first motivation theory we’re going to look at addresses employee needs.

The best-known motivation theory is probably Abraham Maslow’s hierarchy of needs theory.8 Maslow was a psychologist who proposed that within every person is a hierarchy of five needs:

1. Physiological needs: Food, drink, shelter, sex, and other physical requirements. 2. Safety needs: Security and protection from physical and emotional harm, as well as

assurance that physical needs will continue to be met. 3. Social needs: Affection, belongingness, acceptance, and friendship. 4. Esteem needs: Internal esteem factors such as self-respect, autonomy, and achieve-

ment and external esteem factors such as status, recognition, and attention. 5. Self-actualization needs: Growth, achieving one’s potential, and self-fulfillment; the

drive to become what one is capable of becoming.

Maslow argued that each level in the needs hierarchy must be substantially satisfied before the next need becomes dominant (see Exhibit 10-1). An individual moves up the needs

motivation The process by which a person’s efforts are energized, directed, and sustained toward attaining a goal.

percent of German and U.K. workers say they “live to work.”15

Self- actualization

Esteem

Social

Safety

Physiological

EXHIBIT 10-1 Maslow’s Hierarchy of Needs

Source: Motivation and Personality, 2nd ed., by A. H. Maslow, 1970. Reprinted by permission of Prentice Hall, Inc., Upper Saddle River, New Jersey.

hierarchy of needs theory Maslow’s theory that there is a hierarchy of five human needs: physiological, safety, social, esteem, and self-actualization.

6

reason why people leave a company is a bad relation- ship with their boss.

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268 PART FOUR | LEADING

hierarchy from one level to the next. In addition, Maslow separated the five needs into higher and lower levels. Physiological and safety needs were considered lower- order needs; social, esteem, and self-actualization needs were considered higher-order needs. Lower-order needs are predominantly satisfied externally while higher-order needs are satisfied internally.

How does Maslow’s theory explain motivation? Man- agers using Maslow’s hierarchy to motivate employees do things to satisfy employees’needs. But the theory also says that once a need is substantially satisfied, an individual isn’t motivated to satisfy that need. Therefore, to motivate someone, you need to understand what need level that per- son is on in the hierarchy and focus on satisfying needs at or above that level.

Maslow’s need theory has received wide recognition, especially among practicing managers. Its popularity probably can be attributed to the theory’s intuitive logic

and ease of understanding.9 But Maslow provided no empirical support for his theory, and several studies that sought to validate it could not.10

What Are McGregor’s Theory X and Theory Y? “If you’re not a fan of in-your-face management, don’t work here.” That’s how one manu- facturing plant manager described his managerial style.11 And it’s a perfect description of what Douglas McGregor called a Theory X manager.

Douglas McGregor is best known for proposing two assumptions about human nature: Theory X and Theory Y.12 Very simply, Theory X is a negative view of people that assumes workers have little ambition, dislike work, want to avoid responsibility, and need to be closely controlled to work effectively. Theory Y is a positive view that assumes employees enjoy work, seek out and accept responsibility, and exercise self-direction. McGregor believed that Theory Y assumptions should guide management practice and proposed that participation in decision making, responsible and challenging jobs, and good group relations would maximize employee motivation.

Unfortunately, there’s no evidence to confirm that either set of assumptions is valid or that being a Theory Y manager is the only way to motivate employees. For instance, Jen-Hsun Huang, founder of NVIDIA Corporation, an innovative and successful microchip manufac- turer, has been known to use both reassuring hugs and tough love in motivating employees. But he has little tolerance for screw-ups. “In one legendary meeting, he’s said to have ripped into a project team for its tendency to repeat mistakes. ‘Do you suck?’ he asked the stunned employ- ees. ‘Because if you suck, just get up and say you suck.’”13 His message, delivered in classic Theory X style, was that if you need help, ask for it. It’s a harsh approach, but it worked.

What Is Herzberg’s Two-Factor Theory?

Frederick Herzberg’s two-factor theory (also called motivation-hygiene theory) proposes that intrinsic factors are related to job satisfaction, while extrinsic factors are associated with job dis- satisfaction.14 Herzberg wanted to know when people felt exceptionally good (satisfied) or bad (dissatisfied) about their jobs. (These findings are shown in Exhibit 10-2.) He concluded that the replies people gave when they felt good about their jobs were significantly different from the replies they gave when they felt badly. Certain characteristics were consistently related to job satisfaction (factors on the left side of the exhibit), and others to job dissatisfaction (factors on the right side). When people felt good about their work, they tended to cite intrinsic factors arising from the job itself such as achievement, recognition, and responsibility. On the other hand, when they were dissatisfied, they tended to cite extrinsic factors arising from the job con- text such as company policy and administration, supervision, interpersonal relationships, and working conditions.

Linda Lang, chief executive officer of the Jack in the Box fast food chain, is a Theory Y manager. She has a positive view of human nature and assumes that people enjoy work and accept responsibility. Lang fosters a team approach and encourages employees to contribute to decision making. Describing her management style as collaborative rather than directive, Lang motivates employees by giving them responsibility and challenging jobs, and establishing good group relationships. In this photo, Lang visits with an employee in the company’s “Innovation Center,” a test kitchen where employees work on procedures for preparing their products.

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CHAPTER 10 | MOTIVATING AND REWARDING EMPLOYEES 269

In addition, Herzberg believed that the data suggested that the opposite of satisfac- tion was not dissatisfaction, as traditionally had been believed. Removing dissatisfying characteristics from a job would not necessarily make that job more satisfying (or motivat- ing). As shown in Exhibit 10-3, Herzberg proposed that a dual continuum existed: The opposite of “satisfaction” is “no satisfaction,” and the opposite of “dissatisfaction” is “no dissatisfaction.”

Again, Herzberg believed that the factors that led to job satisfaction were separate and distinct from those that led to job dissatisfaction. Therefore, managers who sought to elim- inate factors that created job dissatisfaction could keep people from being dissatisfied but not necessarily motivate them. The extrinsic factors that create job dissatisfaction were called hygiene factors. When these factors are adequate, people won’t be dissatisfied, but

Theory X The assumption that employees dislike work, are lazy, avoid responsibility, and must be coerced to work.

Theory Y The assumption that employees are creative, enjoy work, seek responsibility, and can exercise self-direction.

Motivators Hygiene Factors

Achievement Recognition Work itself Responsibility Advancement Growth

Supervision Company policy Relationship with supervisor Working conditions Salary Relationship with peers Personal life Relationship with employees Status Security

Extremely Satisfied

Neutral Extremely Dissatisfied

EXHIBIT 10-2 Herzberg’s Two-Factor Theory

Traditional View

Satisfaction Dissatisfaction

Motivators

Satisfaction No satisfaction

Herzberg’s View Hygiene factors

No dissatisfaction Dissatisfactiondi ti f ti Di ti f t

EXHIBIT 10-3 Contrasting Views of Satisfaction–Dissatisfaction

two-factor theory Herzberg’s motivation theory, which proposes that intrinsic factors are related to job satisfaction and motivation, whereas extrinsic factors are associated with job dissatisfaction.

hygiene factors Factors that eliminate job dissatisfaction but don’t motivate.

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10.3

Compare and

contrast contemporary

theories of motivation.

270 PART FOUR | LEADING

they won’t be satisfied (or motivated) either. To motivate people, Herzberg suggested emphasizing motivators, the intrinsic factors having to do with the job itself.

Herzberg’s theory enjoyed wide popularity from the mid-1960s to the early 1980s, despite criticisms of his procedures and methodology. Although some critics said his the- ory was too simplistic, it has influenced how we currently design jobs.

What Is McClelland’s Three-Needs Theory? David McClelland and his associates proposed the three-needs theory, which says there are three acquired (not innate) needs that are major motives in work.16 These three needs include the need for achievement (nAch), which is the drive to succeed and excel in relation to a set of standards; the need for power (nPow), which is the need to make others behave in a way that they would not have behaved otherwise; and the need for affiliation (nAff), which is the desire for friendly and close interpersonal relationships. Of these three needs, the need for achievement has been researched the most.

People with a high need for achievement are striving for personal achievement rather than for the trappings and rewards of success. They have a desire to do something better or more efficiently than it’s been done before.17 They prefer jobs that offer personal responsibility for finding solutions to problems, in which they can receive rapid and unambiguous feedback on their performance in order to tell whether they’re improving, and in which they can set moder- ately challenging goals. High achievers avoid what they perceive to be very easy or very diffi- cult tasks. Also, a high need to achieve doesn’t necessarily lead to being a good manager, especially in large organizations. That’s because high achievers focus on their own accomplish- ments while good managers emphasize helping others accomplish their goals.18 McClelland showed that employees can be trained to stimulate their achievement need by being in situations where they have personal responsibility, feedback, and moderate risks.19

The other two needs in this theory haven’t been researched as extensively as the need for achievement. However, we do know that the best managers tend to be high in the need for power and low in the need for affiliation.20

How Do the Contemporary Theories Explain Motivation? The theories we look at in this section represent current explanations of employee motivation. Although these theories may not be as well known as those we just discussed, they are supported by research.21 These contempo- rary motivation approaches include goal-setting theory, job design theory,

equity theory, and expectancy theory.

From the Past to the Present• • Deciding how work tasks should be performed has long been of interest to managers.15 From scientific manage- ment’s attempts to find the “one best way” to do work to the Hawthorne Studies that attempted to unravel patterns of human behavior at work, researchers have been curious about the ideal approach to work design. In the 1950s, Fred- erick Herzberg and his associates began research to “discover the importance of attitudes toward work and the experiences both good and bad, that workers reported.” He wanted to know the kinds of things that made people at their work happy and satisfied or unhappy and dissatisfied. What he discovered changed the way we view job design. The fact that job dissatisfaction and job satisfaction were the

results of different aspects of the work environment was critical. Herzberg’s two-factor theory gave practicing man- agers insights into both job context and job content. And if you wanted to motivate employees, you’d better focus more on the job content aspects (the motivators) than on the job context aspects (the hygiene factors).

In addition, Herzberg’s research stimulated additional interest in work design. The Job Characteristics model, for one, built upon Herzberg’s findings in identifying the five core job dimensions, especially autonomy. As managers and organiza- tions continue to search for work designs that will energize and engage employees, Herzberg’s study of when people felt good and felt bad at work continues as a classic.

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CHAPTER 10 | MOTIVATING AND REWARDING EMPLOYEES 271

What Is Goal-Setting Theory? Before a big assignment or major class project presentation, has a teacher ever encouraged you to “Just do your best”? What does that vague statement, “do your best,” mean? Would your performance on a class project have been higher had that teacher said you needed to score a 93 percent to keep your A in the class? Research on goal-setting theory addresses these issues, and the findings, as you’ll see, are impressive in terms of the effect that goal specificity, challenge, and feedback have on performance.22

There is substantial research support for goal-setting theory, which says that specific goals increase performance and that difficult goals, when accepted, result in higher per- formance than do easy goals. What does goal-setting theory tell us?

First, working toward a goal is a major source of job motivation. Studies on goal setting have demonstrated that specific and challenging goals are superior motivating forces.23 Such goals produce a higher output than does the generalized goal of “do your best.” The specificity of the goal itself acts as an internal stimulus. For instance, when a sales rep commits to making eight sales calls daily, this intention gives him a specific goal to try to attain.

Next, will employees try harder if they have the opportunity to participate in the setting of goals? Not always. In some cases, participatively set goals elicit superior performance; in other cases, individuals performed best when their manager assigned goals. However, participation is probably preferable to assigning goals when employees might resist accept- ing difficult challenges.24

Finally, we know that people will do better if they get feedback on how well they’re pro- gressing toward their goals because feedback helps identify discrepancies between what they’ve done and what they want to do. But all feedback isn’t equally effective. Self-generated feedback—where an employee monitors his or her own progress—has been shown to be a more powerful motivator than feedback coming from someone else.25

need for affiliation (nAff) The desire for friendly and close interpersonal relationships.

need for power (nPow) The need to make others behave in a way that they would not have behaved otherwise.

need for achievement (nAch) The drive to succeed and excel in relation to a set of standards.

three-needs theory McClelland’s theory, which says that three acquired (not innate) needs—achievement, power, and affiliation—are major motives at work.

goal-setting theory The proposition that specific goals increase performance and that difficult goals, when accepted, result in higher performance than do easy goals.

Working toward a goal is a major source of motivation for Mary Kay Cosmetics’ independent beauty consultants. They set their own specific sales goals for achieving different categories of rewards. In this photo, Sean Key, vice president of sales development for Mary Kay, celebrates the accomplishment of LaChelle Seleski, who set a challenging sales goal that motivated her to produce a high output for becoming a career car program qualifier. Starting her Mary Kay business as a college student, Seleski has consistently set and met ambitious sales goals and has earned the use of five Mary Kay career cars.

motivators Intrinsic factors that have to do with the job itself and serve to motivate individuals.

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272 PART FOUR | LEADING

Three other contingencies besides feedback influence the goal-performance relationship: goal commitment, adequate self-efficacy, and national culture.

First, goal-setting theory assumes that an individual is committed to the goal. Commit- ment is most likely when goals are made public, when the individual has an internal locus of control, and when the goals are self-set rather than assigned.26

Next, self-efficacy refers to an individual’s belief that he or she is capable of perform- ing a task.27 The higher your self-efficacy, the more confidence you have in your ability to succeed in a task. So, in difficult situations, we find that people with low self-efficacy are likely to reduce their effort or give up altogether, whereas those with high self-efficacy will try harder to master the challenge.28 In addition, individuals with high self-efficacy seem to respond to negative feedback with increased effort and motivation, whereas those with low self-efficacy are likely to reduce their effort when given negative feedback.29

Finally, the value of goal-setting theory depends on the national culture. It’s well adapted to North American countries because its main ideas align reasonably well with those cul- tures. It assumes that subordinates will be reasonably independent (not a high score on power distance), that people will seek challenging goals (low in uncertainty avoidance), and that performance is considered important by both managers and subordinates (high in as- sertiveness). Don’t expect goal setting to lead to higher employee performance in countries where the cultural characteristics aren’t like this.

Exhibit 10-4 summarizes the relationships among goals, motivation, and performance. Our overall conclusion is that the intention to work toward hard and specific goals is a pow- erful motivating force. Under the proper conditions, it can lead to higher performance. How- ever, there is no evidence that such goals are associated with increased job satisfaction.30

How Does Job Design Influence Motivation? Because managers want to motivate individuals on the job, we need to look at ways to design motivating jobs. If you look closely at what an organization is and how it works, you’ll find that it’s composed of thousands of tasks. These tasks are, in turn, aggregated into jobs. We use the term job design to refer to the way tasks are combined to form complete jobs. The jobs that people perform in an organization should not evolve by chance. Managers should design jobs deliberately and thoughtfully to reflect the demands of the changing environ- ment, the organization’s technology, and employees’ skills, abilities, and preferences.31 When jobs are designed like that, employees are motivated to work hard. What are the ways that managers can design motivating jobs?32 We can answer that with the job characteristics model (JCM) developed by J. Richard Hackman and Greg R. Oldham.33

EXHIBIT 10-4 Goal-Setting Theory

Committed to Achieving

Accepted

Goals Motivation

(intention to work toward goal)

Participation in Setting

National Culture

Self-Efficacy

• Goals are public • Individual has internal locus of control • Self-set goals

• Specific • Difficult

Higher Performance Plus

Goal Achievement

Self-Generated Feedback on

Progress

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CHAPTER 10 | MOTIVATING AND REWARDING EMPLOYEES 273

According to Hackman and Oldham, any job can be described in terms of the follow- ing five core job dimensions:

1. Skill variety. The degree to which the job requires a variety of activities so the worker can use a number of different skills and talents

2. Task identity. The degree to which the job requires completion of a whole and identi- fiable piece of work

3. Task significance. The degree to which the job affects the lives or work of other people 4. Autonomy. The degree to which the job provides freedom, independence, and dis-

cretion to the individual in scheduling the work and in determining the procedures to be used in carrying it out

5. Feedback. The degree to which carrying out the work activities required by the job results in the individual’s obtaining direct and clear information about the effective- ness of his or her performance

Exhibit 10-5 presents the model. Notice how the first three dimensions—skill variety, task identity, and task significance—combine to create meaningful work. What we mean is that if these three characteristics exist in a job, we can predict that the person will view his or her job as being important, valuable, and worthwhile. Notice, too, that jobs that possess autonomy give the job incumbent a feeling of personal responsibility for the results and that, if a job provides feedback, the employee will know how effectively he or she is performing.

job characteristics model (JCM) A framework for analyzing and designing jobs that identifies five core job dimensions, their interrelationships, and their impact on outcomes.

job design The way tasks are combined to form complete jobs.

Critical psychological

states

Personal and work outcomes

Experienced meaningfulness of

the work

Experienced responsibility for

outcomes of the work

Knowledge of the actual results of the

work activities

High internal work motivation

High-quality work performance

High satisfaction with the work

Low absenteeism and turnover

Employee growth-need

strength

Core job dimensions

Skill variety Task identity

Task significance

Autonomy

Feedback

EXHIBIT 10-5 Job Characteristics Model

self-efficacy An individual’s belief that he or she is capable of performing a task.

Source: J. R. Hackman, “Work Design,” in J. R. Hackman and J. L. Suttle (ed.), Improving Life at Work (Glenview, IL: Scott, Foresman, 1977), p. 129. With permission of the authors.

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274 PART FOUR | LEADING

From a motivational point of view, the JCM suggests that internal rewards are obtained when an employee learns (knowledge of results through feedback) that he or she personally (experienced responsibility through autonomy of work) has performed well on a task that he or she cares about (experienced meaningfulness through skill variety, task identity, and/or task significance). The more these three conditions characterize a job, the greater the employee’s motivation, performance, and satisfaction and the lower his or her absenteeism and the likelihood of resigning. As the model shows, the links between the job dimensions and the outcomes are moderated by the strength of the individual’s growth need (the person’s desire for self-esteem and self-actualization). Individuals are more likely to experience the critical psychological states and respond positively when their jobs include the core dimen- sions than are individuals with a low growth need. This distinction may explain the mixed results with job enrichment (vertical expansion of a job by adding planning and evaluation responsibilities): Individuals with low growth need don’t tend to achieve high performance or satisfaction by having their jobs enriched.

The JCM provides significant guidance to managers for job design for both individuals and teams.34 The suggestions shown in Exhibit 10-6, which are based on the JCM, specify the types of changes in jobs that are most likely to improve in each of the five core job dimensions.

What Is Equity Theory? Do you ever wonder what kind of grade the person sitting next to you in class makes on a test or on a major class assignment? Most of us do! Being human, we tend to compare ourselves with others. If someone offered you $50,000 a year on your first job after graduating from college, you’d probably jump at the offer and report to work enthusiastic, ready to tackle whatever needed to be done, and certainly satisfied with your pay. How would you react, though, if you found out a month into the job that a coworker—another recent graduate, your age, with comparable grades from a comparable school, and with comparable work experi- ence—was getting $55,000 a year? You’d probably be upset! Even though in absolute terms, $50,000 is a lot of money for a new graduate to make (and you know it!), that suddenly isn’t the issue. Now you see the issue as what you believe is fair—what is equitable. The term equity is related to the concept of fairness and equitable treatment compared with others who behave in similar ways. There’s considerable evidence that employees compare themselves to others and that inequities influence how much effort employees exert.35

Equity theory, developed by J. Stacey Adams, proposes that employees compare what they get from a job (outcomes) in relation to what they put into it (inputs) and then compare their inputs-outcomes ratio with the inputs-outcomes ratios of relevant others (Exhibit 10-7). If an employee perceives her ratio to be equitable in comparison to those of relevant others, there’s no problem. However, if the ratio is inequitable, she views herself as underrewarded or overre- warded. When inequities occur, employees attempt to do something about it.36 The result might

Combine tasks

Form natural work units

Establish client relationships

Expand jobs vertically

Open feedback channels

Suggested Action

Skill variety

Task identity

Task significance

Autonomy

Feedback

Core Job Dimension

EXHIBIT 10-6 Guidelines for Job Redesign

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CHAPTER 10 | MOTIVATING AND REWARDING EMPLOYEES 275

be lower or higher productivity, improved or reduced quality of output, increased absenteeism, or voluntary resignation.

The referent—the other persons, systems, or selves individ- uals compare themselves against in order to assess equity—is an important variable in equity theory.37 Each of the three referent categories is important. The “persons” category includes other individuals with similar jobs in the same organization but also includes friends, neighbors, or professional associates. Based on what they hear at work or read about in newspapers or trade jour- nals, employees compare their pay with that of others. The “system” category includes organizational pay policies, procedures, and allocation. The “self ” category refers to inputs-outcomes ratios that are unique to the individual. It reflects past personal experi- ences and contacts and is influenced by criteria such as past jobs or family commitments.

Originally, equity theory focused on distributive justice, which is the perceived fairness of the amount and allocation of rewards among individuals. More recent research has focused on looking at issues of procedural justice, which is the perceived fairness of the process used to determine the distribution of rewards. This research shows that distributive justice has a greater influence on employee satisfaction than procedural justice, while procedural justice tends to affect an employee’s organizational commitment, trust in his or her boss, and intention to quit.38 What are the implications for managers? They should consider openly sharing information on how allocation decisions are made, follow consistent and unbiased procedures, and engage in similar prac- tices to increase the perception of procedural justice. By increas- ing the perception of procedural justice, employees are likely to view their bosses and the organization as positive even if they’re dissatisfied with pay, promotions, and other personal outcomes.

PERCEIVED RATIO COMPARISON* EMPLOYEE’S ASSESSMENT

Inequity (underrewarded)

Equity

Inequity (overrewarded)

*Person A is the employee, and Person B is a relevant other or referent.

Outcomes A Inputs A

> Outcomes B Inputs B

Outcomes A Inputs A

= Outcomes B Inputs B

Outcomes A Inputs A

< Outcomes B Inputs B

EXHIBIT 10-7 Equity Theory Relationships

referent The persons, systems, or selves against which individuals compare themselves to assess equity.equity theory

The theory that an employees compares his or her job’s input-outcomes ratio with that of relevant others and then corrects any inequity.

job enrichment The vertical expansion of a job by adding planning and evaluation responsibilities.

procedural justice Perceived fairness of the process used to determine the distribution of rewards.

distributive justice Perceived fairness of the amount and allocation of rewards among individuals.

Right orWrong?

The 14-member investment and operations staff of the Missouri State Employees’ Retirement System (MOSERS) received almost $300,000 in bonuses in 2008 even though the pension fund lost almost $1.8 billion.39

One person, the organization’s chief investment officer, received over a third of that amount.Organization officials said the payments were based on the fund outperforming the market and that by setting goals and awarding bonuses, they can retain talented employees and improve per- formance. The state’s governor called the bonuses “unconscionable.” What do you think? What ethical issues do you see in this situation? What would you do?

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How Does Expectancy Theory Explain Motivation? The most comprehensive explanation of how employees are motivated is Victor Vroom’s expectancy theory.40 Although the theory has its critics,41 most research evidence supports it.42

Expectancy theory states that an individual tends to act in a certain way based on the expectation that the act will be followed by a given outcome and on the attractive- ness of that outcome to the individual. It includes three variables or relationships (see Exhibit 10-8):

1. Expectancy or effort-performance linkage is the probability perceived by the individual that exerting a given amount of effort will lead to a certain level of performance.

2. Instrumentality or performance-reward linkage is the degree to which the individual believes that performing at a particular level is instrumental in attaining the desired outcome.

3. Valence or attractiveness of reward is the importance that the individual places on the potential outcome or reward that can be achieved on the job. Valence considers both the goals and needs of the individual.

This explanation of motivation might sound complicated, but it really isn’t. It can be summed up in the questions: How hard do I have to work to achieve a certain level of per- formance, and can I actually achieve that level? What reward will performing at that level of performance get me? How attractive is the reward to me, and does it help me achieve my own personal goals? Whether you are motivated to put forth effort (that is, to work hard) at any given time depends on your goals and your perception of whether a certain level of per- formance is necessary to attain those goals. Let’s look at an example. Your third author had a student many years ago who went to work for IBM as a sales rep. Her favorite work “reward” was having an IBM corporate jet fly into Springfield, Missouri, to pick up her best customers and her and take them for a weekend of golfing at some fun location. But to get that particular “reward,” she had to achieve a certain level of performance, which involved exceeding her sales goals by a specified percentage. How hard she was willing to work (that is, how motivated she was to put forth effort) was dependent on the level of per- formance that had to be met and the likelihood that if she achieved at that level of perform- ance she would receive that reward. Since she “valued” that reward, she always worked hard to exceed her sales goals. And the performance-reward linkage was clear because her hard work and performance achievements were always rewarded by the company with the reward she valued (access to a corporate jet).

The key to expectancy theory is understanding an individual’s goal and the linkage between effort and performance, between performance and rewards, and finally, between rewards and individual goal satisfaction. It emphasizes payoffs, or rewards. As a result, we have to believe that the rewards an organization is offering align with what the individual wants. Expectancy theory recognizes that there is no universal principle for explaining what motivates individuals and thus stresses that managers understand why employees view certain outcomes

CBAIndividualeffort Individual

performance Organizational

rewards Individual

goals

= Effort–performance linkage (expectancy)

= Performance–reward linkage (instrumentality)

= Attractiveness (valence)

=A

=B

=C

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as attractive or unattractive. After all, we want to reward individuals with those things they value positively. Also, expectancy theory emphasizes expected behaviors. Do employees know what is expected of them and how they’ll be evaluated? Finally, the theory is concerned with percep- tions. Reality is irrelevant. An individual’s own perceptions of performance, reward, and goal outcomes, not the outcomes themselves, will determine his or her motivation (level of effort).

How Can We Integrate the Contemporary Motivation Theories? Many of the ideas underlying the contemporary motivation theories are complementary, and you’ll understand better how to motivate people if you see how the theories fit together.43 Exhibit 10-9 presents a model that integrates much of what we know about

High nAch

Performance Evaluation

Criteria

Objective Performance Evaluation

System

Reinforcement

Dominant Needs

Goals Direct

Behavior

Ability Job

Design

Individual Effort

Individual Performance

Organizational Rewards

Individual Goals

Job Design

Equity Comparison

: A BII A BO O

EXHIBIT 10-9 Integrating Contemporary Theories of Motivation

expectancy theory The theory that an individual tends to act in a certain way, based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual.IS

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Discuss current issues

in motivating employees.

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motivation. Its basic foundation is the expectancy model. Let’s work through the model, starting on the left.

The individual effort box has an arrow leading into it. This arrow flows from the individual’s goals. Consistent with goal-setting theory, this goals-effort link is meant to illustrate that goals direct behavior. Expectancy theory predicts that an employee will exert a high level of effort if he or she perceives that there is a strong relationship between effort and performance, performance and rewards, and rewards and satisfaction of per- sonal goals. Each of these relationships is, in turn, influenced by certain factors. You can see from the model that the level of individual performance is determined not only by the level of individual effort but also by the individual’s ability to perform and by whether the organization has a fair and objective performance evaluation system. The performance- reward relationship will be strong if the individual perceives that it is performance (rather than seniority, personal favorites, or some other criterion) that is rewarded. The final link in expectancy theory is the rewards-goal relationship. The traditional need theories come into play at this point. Motivation would be high to the degree that the rewards an individual received for his or her high performance satisfied the dominant needs consis- tent with his or her individual goals.

A closer look at the model also shows that it considers the achievement-need, reinforce- ment, equity, and JCM theories. The high achiever isn’t motivated by the organization’s assessment of his or her performance or organizational rewards; hence the jump from effort to individual goals for those with a high nAch. Remember that high achievers are internally driven as long as the jobs they’re doing provide them with personal responsibility, feedback and moderate risks. They’re not concerned with the effort-performance, performance-reward, or rewards-goals linkages.

Reinforcement theory is seen in the model by recognizing that the organization’s rewards reinforce the individual’s performance. If managers have designed a reward sys- tem that is seen by employees as “paying off ” for good performance, the rewards will rein- force and encourage continued good performance. Rewards also play a key part in equity theory. Individuals will compare the rewards (outcomes) they have received from the inputs or efforts they made with the inputs-outcomes ratio of relevant others. If inequities exist, the effort expended may be influenced.

Finally, the JCM is seen in this integrative model. Task characteristics (job design) influence job motivation at two places. First, jobs that are designed around the five job dimensions are likely to lead to higher actual job performance because the individual’s motivation will be stimulated by the job itself—that is, they will increase the linkage between effort and performance. Second, jobs that are designed around the five job dimen- sions also increase an employee’s control over key elements in his or her work. Therefore, jobs that offer autonomy, feedback, and similar task characteristics help to satisfy the individual goals of employees who desire greater control over their work.

What Current Motivation Issues Do Managers Face?

Understanding and predicting employee motivation is one of the most popular areas in management research. We’ve introduced you to several motivation theories. However, even current studies of employee motivation are influenced by some significant workplace issues—cross-cultural chal-

lenges, motivating unique groups of workers, and designing appropriate rewards programs.

How Does Country Culture Affect Motivation Efforts? In today’s global business environment, managers can’t automatically assume that motivational programs that work in one geographic location are going to work in others. Most current motivation theories were developed in the United States by Americans and about Americans.44 Maybe the most blatant pro-American characteristic in these theories

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is the strong emphasis on individualism and achievement. For instance, both goal-setting and expectancy theories emphasize goal accomplishment as well as rational and indi- vidual thought. Let’s look at the motivation theories to see if there’s any cross-cultural transferability.

Maslow’s need hierarchy argues that people start at the physiological level and then move progressively up the hierarchy in order. This hierarchy, if it has any application at all, aligns with American culture. In countries like Japan, Greece, and Mexico, where uncertainty avoidance characteristics are strong, security needs would be on top of the need hierarchy. Countries that score high on nurturing characteristics—Denmark, Sweden, Norway, the Netherlands, and Finland—would have social needs on top.45 We would predict, for instance, that group work will be more motivating when the country’s culture scores high on the nurturing criterion.

Another motivation concept that clearly has an American bias is the achievement need. The view that a high achievement need acts as an internal motivator presupposes two cul- tural characteristics—a willingness to accept a moderate degree of risk (which excludes countries with strong uncertainty avoidance characteristics) and a concern with performance (which applies almost singularly to countries with strong achievement characteristics). This combination is found in Anglo-American countries like the United States, Canada, and Great Britain.46 On the other hand, these characteristics are relatively absent in countries such as Chile and Portugal.

Equity theory has a relatively strong following in the United States. That’s not surprising given that U.S.-style reward systems are based on the assumption that work- ers are highly sensitive to equity in reward allocations. In the United States, equity is meant to closely link pay to performance. However, recent evidence suggests that in collectivist cultures, especially in the former socialist countries of Central and Eastern Europe, employees expect rewards to reflect their individual needs as well as their per- formance.47 Moreover, consistent with a legacy of communism and centrally planned economies, employees exhibited a greater “entitlement” attitude—that is, they expected outcomes to be greater than their inputs.48 These findings suggest that U.S.-style pay practices may need to be modified in some countries in order to be perceived as fair by employees.

Despite these cross-cultural differences in motivation, don’t assume there are no cross-cultural consistencies, because there are some. For instance, the desire for interest- ing work seems important to almost all workers, regardless of their national culture. In a study of seven countries, employees in Belgium, Britain, Israel, and the United States

Most motivational theories were developed in the United States, where cultural characteristics favor individualism and a high achievement need. Motivating employees in countries with these cultural characteristics differs from motivating workers in countries such as China that value relationships and collectivism. For the Chinese factory workers shown here, taking a break from work to laugh and visit with coworkers and to soak their feet in tubs of traditional herbal medicine may be the motivators that satisfy their physiological, safety, and social needs.

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Developing Your Skill About the Skill Because a simple, all-encompassing set of motivational guidelines is not available, the following suggestions draw on the essence of what we know about motivating employees.

Steps in Practicing the Skill 1 Recognize individual differences. Almost every

contemporary motivation theory recognizes that employees are not homogeneous. They have different needs. They also differ in terms of attitudes, personality, and other important individual variables.

2 Match people to jobs. A great deal of evidence shows the motivational benefits of carefully matching people to jobs. People who lack the necessary skills to perform successfully will be at a disadvantage.

3 Use goals. You should ensure that employees have hard, specific goals and feedback on how well they’re doing in pursuit of those goals. In many cases, these goals should be participatively set.

4 Ensure that goals are perceived as attainable. Re- gardless of whether goals are actually attainable, em- ployees who see goals as unattainable will reduce their effort. Be sure, therefore, that employees feel confident that increased efforts can lead to achiev- ing performance goals.

5 Individualize rewards. Because employees have different needs, what acts as a reinforcer for one may not do so for another. Use your knowledge of employee differences to individualize the rewards over which you have control. Some of the more obvious rewards that you can allocate include pay, promotions, autonomy, and the opportunity to participate in goal setting and decision making.

6 Link rewards to performance. You need to make rewards contingent on performance. Rewarding factors other than performance will only reinforce the impor- tance of those other factors. Key rewards such as pay increases and promotions should be given for the attain- ment of employees’ specific goals.

7 Check the system for equity. Employees should perceive that rewards or outcomes are equal to the inputs given. On a simplistic level, experience, ability, effort, and other obvious inputs should explain differences in pay, responsibility, and other obvious outcomes.

8 Don’t ignore money. It’s easy to get so caught up in setting goals, creating interesting jobs, and providing opportunities for participation that you forget that money is a major reason why most people work. Thus, the allocation of performance-based wage increases, piece-work bonuses, employee stock ownership plans, and other pay incentives are important in determining employee motivation.

ranked “interesting work” number one among 11 work goals. It was ranked either second or third in Japan, the Netherlands, and Germany.49 Similarly, in a study comparing job-preference outcomes among graduate students in the United States, Canada, Aus- tralia, and Singapore, growth, achievement, and responsibility were rated the top three and had identical rankings.50 Both studies suggest some universality to the importance of intrinsic factors identified by Herzberg in his two-factor theory. Another recent study examining workplace motivation trends in Japan also seems to indicate that Herzberg’s model is applicable to Japanese employees.51

How Can Managers Motivate Unique Groups of Workers? Motivating employees has never been easy! Employees come into organizations with different needs, personalities, skills, abilities, interests, and aptitudes. They have different expectations of their employers and different views of what they think their employer has a right to expect of them. And they vary widely in what they want from their jobs. For instance, some employ- ees get more satisfaction out of their personal interests and pursuits and only want a weekly paycheck—nothing more. They’re not interested in making their work more challenging or interesting or in “winning” performance contests. Others derive a great deal of satisfaction in

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their jobs and are motivated to exert high levels of effort. Given these differences, how can managers do an effective job of motivating the unique groups of employees found in today’s workforce? One thing is to understand the motivational requirements of these groups includ- ing diverse employees, professionals, and contingent workers.

MOTIVATING A DIVERSE WORKFORCE. To maximize motivation among today’s workforce, managers need to think in terms of flexibility. For instance, studies tell us that men place more importance on having autonomy in their jobs than do women. In contrast, the opportunity to learn, convenient and flexible work hours, and good interpersonal relations are more important to women.52 Having the opportunity to be independent and to be exposed to different experiences is important to Gen Y employ- ees whereas older workers may be more interested in highly structured work opportu- nities.53 Managers need to recognize that what motivates a single mother with two dependent children who’s working full time to support her family may be very different from the needs of a single part-time employee or an older employee who is working only to supplement his or her retirement income. A diverse array of rewards is needed to motivate employees with such diverse needs. Many of the work/life balance programs (see Chapter 2) that organizations have implemented are a response to the varied needs of a diverse workforce. In addition, many organizations have developed flexible work arrangements that recognize different needs. These types of programs may become even more popular as employers look for ways to help employees cope with high fuel prices. For instance, a compressed workweek is a workweek where employees work longer hours per day but fewer days per week. The most common arrangement is four 10-hour days (a 4-40 program). However, organizations could design whatever schedules they wanted to fit employees’ needs. Another alternative is flexible work hours (also known as flextime), which is a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits. In a flextime schedule, there are certain common core hours when all employees are required to be on the job, but starting, ending, and lunch-hour times are flexible. According to a survey by Hewitt Associates, 75 percent of large companies now offer flextime benefits. Another survey by Watson Wyatt of mid- and large-sized companies found that flexible work schedules was the most commonly offered benefit.54

In Great Britain, McDonald’s is experimenting with an unusual program—dubbed the Family Contract—to reduce absenteeism and turnover at some of its restaurants. Under this Family Contract, employees from the same immediate family can fill in for one another for any work shift without having to clear it first with their manager.55 This type of job scheduling, which can be effective in motivating a diverse workforce, is called job sharing—the practice of having two or more people split a full-time job. Although something like McDonald’s Family Contract may be appropriate for a low-skilled job, other organizations might offer job sharing to professionals who want to work but don’t want the demands and hassles of a full-time position. For instance, at Ernst & Young, employees in many of the company’s locations can choose from a variety of flexible work arrangements including job sharing.

Another alternative made possible by information technology is telecommuting. Here, employees work at home but are linked by technology to the workplace. It’s

compressed workweek A workweek in which employees work longer hours per day but fewer days per week.

telecommuting A job approach in which employees work at home but are linked by technology to the workplace.

job sharing When two or more people split (share) a full- time job.

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estimated that some 12 percent (and maybe even as high as 15 percent) of the U.S. workforce is part of this “distributed workforce.”57 For example, around 40 percent of IBM’s workforce has no physical office space. The number is even higher for Sun Microsystems where nearly 50 percent of employees work off-site.58 Since many jobs can be done at off-site locations, this approach might be close to the ideal job for many people as there is no commuting, the hours are flexible, there’s freedom to dress as you please, and there are little or no interruptions from colleagues. However, keep in mind that not all employees embrace the idea of telecommuting. Some workers relish the in- formal interactions at work that satisfy their social needs as well as being a source of new ideas.

Do flexible work arrangements motivate employees? Although such arrangements might seem highly motivational, both positive and negative relationships have been found. For instance, a recent study looking at the impact of telecommuting on job satisfaction found that job satisfaction initially increased as the extent of telecommuting increased, but as the number of hours spent telecommuting increased, job satisfaction started to level off, decreased slightly, and then stabilized.59

MOTIVATING PROFESSIONALS. In contrast to a generation ago, the typical employee today is more likely to be a professional with a college degree than a blue-collar factory worker. What special concerns should managers be aware of when trying to motivate a team of engineers at Intel’s India Development Center, software designers at SAS Institute in North Carolina, or a group of consultants at Accenture in Singapore?

Professionals are different from nonprofessionals.60 They have a strong and long-term commitment to their field of expertise. To keep current in their field, they need to regularly update their knowledge, and because of their commitment to their profession they rarely define their workweek as 8 A.M. to 5 P.M. five days a week.

What motivates professionals? Money and promotions typically are low on their priority list. Why? They tend to be well paid and enjoy what they do. In contrast, job challenge tends to be ranked high. They like to tackle problems and find solutions. Their chief reward is the work itself. Professionals also value support. They want others to think that what they’re working on is important. That may be true for all employees,

MANAGING DIVERSITY | Developing Employee Potential: The Bottom Line of Diversity

One of a manager’s more important goals is helping employees develop their potential.56 This is particularly important in managing talented diverse employees who can bring new perspectives and ideas to the business but who may find that the workplace environment is not as con- ducive as it could be to accepting and embracing these different perspectives. For instance, managers at Bell Labs have worked hard to develop an environment in which the ideas of diverse employees are encouraged openly.

What can managers do to ensure that their diverse employees have the opportunity to develop their poten- tial? One thing they can do is make sure that diverse role models are in leadership positions so that others see the opportunities to grow and advance. Giving motivated, talented, hard-working, and enthusiastic diverse employ- ees opportunities to excel in decision-making roles can be a powerful motivator to other diverse employees to work hard to develop their own potential. A mentoring program

in which diverse employees are given the opportunity to work closely with organizational leaders can be a powerful tool. At Silicon Graphics, for instance, new employees become part of a mentoring group called “Horizons.” Through this mentoring group, diverse employees have the opportunity to observe and learn from key company deci- sion makers.

Another way for managers to develop the potential of their diverse employees is to offer developmental work assignments that provide a variety of learning experiences in different organizational areas. Employees who are pro- vided the opportunity to learn new processes and new technology are more likely to excel at their work and to stay with the company. These types of developmental opportunities are particularly important for diverse employ- ees because it empowers them with tools that are critical to professional development.

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but professionals tend to be focused on their work as their central life interest, whereas nonprofessionals typically have other interests outside of work that can compensate for needs not met on the job.

MOTIVATING CONTINGENT WORKERS. As full-time jobs have been eliminated through downsizing and other organizational restructurings, the number of openings for part-time, contract, and other forms of temporary work have increased. Contingent workers don’t have the security or stability that permanent employees have, and they don’t identify with the organization or display the commitment that other employees do. Temporary workers also typically get little or no benefits such as health care or pensions.61

There’s no simple solution for motivating contingent employees. For that small set of individuals who prefer the freedom of their temporary status, the lack of stability may not be an issue. In addition, temporariness might be preferred by highly compensated physi- cians, engineers, accountants, or financial planners who don’t want the demands of a full- time job. But these are the exceptions. For the most part, temporary employees are not temporary by choice.

What will motivate involuntarily temporary employees? An obvious answer is the opportunity to become a permanent employee. In cases in which permanent employees are selected from a pool of temps, the temps will often work hard in hopes of becoming permanent. A less obvious answer is the opportunity for training. The ability of a temporary employee to find a new job is largely dependent on his or her skills. If an employee sees that the job he or she is doing can help develop marketable skills, then motivation is increased. From an equity standpoint, when temps work alongside permanent employees who earn more and get benefits too for doing the same job, the performance of temps is likely to suffer. Separating such employees or perhaps minimizing interdependence between them might help managers counteract potential problems.62

How Can Managers Design Appropriate Rewards Programs? Blue Cross of California, one of the nation’s largest health insurers, pays bonuses to doc- tors serving its health maintenance organization members based on patient satisfaction and other quality standards. FedEx’s drivers are motivated by a pay system that rewards them for timeliness and how much they deliver.63 There’s no doubt that employee rewards pro- grams play a powerful role in motivating appropriate employee behavior. Some of the more popular rewards programs include open-book management, employee recognition, and pay-for-performance.

HOW CAN OPEN-BOOK MANAGEMENT PROGRAMS MOTIVATE EMPLOYEES? Within 24 hours after managers of the Heavy Duty Division of Springfield Remanufacturing Company (SRC) gather to discuss a multipage financial document, every plant employ- ee will have seen the same information. If the employees can meet shipment goals, they’ll all share in a large year-end bonus.64 Many organizations of various sizes involve their employees in workplace decisions by opening up the financial statements (the “books”). They share that information so that employees will be motivated to make better decisions about their work and better able to understand the implications of what they do, how they do it, and the ultimate impact on the bottom line. This approach is called open-book management and many organizations are using it.65 At Best Buy, the

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284 PART FOUR | LEADING

“Donuts with Darren” sessions (held when Darren Jackson was the company’s chief f inancial officer) were so popular that more than 600 employees regu- larly took part. His presentations covered the finan- cials and the basics of finance.66

The goal of open-book management is to get employees to think like an owner by seeing the impact their decisions have on financial results. Since many employees don’t have the knowledge or background to understand the financials, they have to be taught how to read and understand the organization’s financial statements. Once employees have this knowledge, how- ever, managers need to regularly share the numbers with them. By sharing this information, employees begin to see the link between their efforts, level of performance, and operational results.

HOW CAN MANAGERS USE EMPLOYEE RECOGNI- TION PROGRAMS? Employee recognition programs consist of personal attention and expressions of interest, approval, and appreciation for a job well done.67 They can take numerous forms. For instance, Kelly Services introduced a new version of its points- based incentive system to better promote productivity and retention among its employ- ees. The program, called Kelly Kudos, gives employees more choices of awards and allows them to accumulate points over a longer time period. It’s working. Participants generate three times more revenue and hours than employees not receiving points.68

Most managers, however, use a far more informal approach. For example, when Julia Stewart, currently the president and CEO of IHOP International, was president of Applebee’s Restaurants, she would frequently leave sealed notes on the chairs of employees after everyone had gone home.69 These notes explained how important Stewart thought the person’s work was or how much she appreciated the completion of a project. Stewart also relied heavily on voice mail messages left after office hours to tell employees how appreciative she was for a job well done. And recognition doesn’t have to come only from managers. Some 35 percent of companies encourage coworkers to recognize peers for outstanding work efforts.70 For instance, managers at Yum! Brands Inc. (the Kentucky-based parent of food chains Taco Bell, KFC, and Pizza Hut) were looking for ways to reduce employee turnover. They found a successful customer- service program involving peer recognition at KFC restaurants in Australia. Workers there spontaneously rewarded fellow workers with “Champs cards, an acronym for attributes such as cleanliness, hospitality, and accuracy.” Yum! implemented the pro- gram in other restaurants around the world, and credits the peer recognition with reduc- ing hourly employee turnover from 181 percent to 109 percent.71

A recent survey of organizations found that 84 percent had some type of program to recognize worker achievements.72 And do employees think these programs are impor- tant? You bet! A survey of a wide range of employees asked them what they considered the most powerful workplace motivator. Their response? Recognition, recognition, and more recognition!73

Consistent with reinforcement theory (see Chapter 8), rewarding a behavior with recognition immediately following that behavior is likely to encourage its repetition. And recognition can take many forms. You can personally congratulate an employee in pri- vate for a good job. You can send a handwritten note or e-mail message acknowledging something positive that the employee has done. For employees with a strong need for social acceptance, you can publicly recognize accomplishments. To enhance group cohesiveness and motivation, you can celebrate team successes. For instance, you can do something as simple as throw a pizza party to celebrate a team’s accomplishments. Some of these things may seem simple, but they can go a long way in showing employees they’re valued.

USAA chief executive Josue Robles, Jr., personally thanked employees during a celebration after the firm was ranked number one for customer service by Business Week magazine. Personal recognition is a powerful tool in motivating employees at USAA, a financial services provider for the military community. Employees are recognized frequently for educational achievements and community and customer service during breakfasts, luncheons, and parties; through articles in USAA’s weekly newsletter; and during the firm’s weekly television program. The company gives employees “thank you” note stationery so they can express their appreciation and gratitude to coworkers for their help at work.

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HOW CAN MANAGERS USE PAY-FOR-PERFORMANCE TO MOTIVATE EMPLOYEES? Here’s a survey statistic that may surprise you: Forty percent of employees see no clear link between performance and pay.74 You have to think: What are the companies where these employees work paying for? They’re obviously not clearly communicating per- formance expectations.75 Pay-for-performance programs are variable compensation plans that pay employees on the basis of some performance measure.76 Piece-rate pay plans, wage incentive plans, profit-sharing, and lump-sum bonuses are examples. What differentiates these forms of pay from more traditional compensation plans is that instead of paying a person for time on the job, pay is adjusted to reflect some perform- ance measure. These performance measures might include such things as individual productivity, team or work group productivity, departmental productivity, or the overall organization’s profit performance.

Pay-for-performance is probably most compatible with expectancy theory. Individuals should perceive a strong relationship between their performance and the rewards they receive for motivation to be maximized. If rewards are allocated only on nonperformance factors— such as seniority, job title, or across-the-board pay raises—then employees are likely to reduce their efforts. From a motivation perspective, making some or all an employee’s pay conditional on some performance measure focuses his or her attention and effort toward that measure, then reinforces the continuation of the effort with a reward. If the employee, team, or organization’s performance declines, so does the reward. Thus, there’s an incentive to keep efforts and motivation strong.

Pay-for-performance programs are popular. Some 80 percent of large U.S. compa- nies have some form of variable pay plan.77 These types of pay plans have also been tried in other countries such as Canada and Japan. About 30 percent of Canadian companies and 22 percent of Japanese companies have company-wide pay-for- performance plans.78

Do pay-for-performance programs work? For the most part, studies seem to indicate that they do. For instance, one study found that companies that used pay-

for-performance programs performed better financially than those that did not.79 Another study showed

that pay-for-performance

pay-for-performance programs Variable compensation plans that pay employees on the basis of some performance measure.

Pfizer, the largest research-based pharmaceutical company in the world, uses a pay-for-performance compensation system to recognize the hard work, effort, and commitment of employees like the scientists shown here in a cancer research laboratory. Part of the company’s performance-related pay program includes merit-based pay and an annual bonus as a percentage of an employee’s salary. For Pfizer, pay for performance reflects the high value the company places on its employees in achieving its mission of being a global leader in health care.

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programs with outcome-based incentives had a positive impact on sales, customer satisfac- tion, and profits.80 If an organization uses work teams, managers should consider group- based performance incentives that will reinforce team effort and commitment. But whether these programs are individual based or team based, managers need to ensure that they’re specific about the relationship between an individual’s pay and his or her expected level of appropriate performance. Employees must clearly understand exactly how performance— theirs and the organization’s—translates into dollars on their paychecks.81

A FINAL NOTE ON EMPLOYEE REWARDS PROGRAMS. During times of economic and financial uncertainty, managers’ abilities to recognize and reward employees are often severely constrained. It’s hard to keep employees productive during challenging times, even though it’s especially critical. It’s not surprising, then, that employees feel less connected to their work. In fact, a recent study by the Corporate Executive Board found that declining employee engagement has decreased overall productivity by 3 to 5 percent.82 But there are actions managers can take to maintain and maybe even increase employees’ motivation levels. One is to clarify each person’s role in the organization. Show them how their efforts are contributing to improving the company’s overall situation. It’s also important to keep communication lines open and use two-way exchanges between top-level managers and employees to soothe fears and concerns. The key with taking any actions is continuing to show workers that the company cares about them. As we said at the beginning of the chapter, the value in companies comes from employees who are motivated to be there. Managers have to give employees a reason to want to be there.

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ApplicationsReview and

Chapter Summary

CHAPTER 10 | MOTIVATING AND REWARDING EMPLOYEES 287

The job characteristics model says there are five core job dimensions (skill variety, task identity, task significance, autonomy, and feedback) that are used to design motivating jobs.

Equity theory focuses on how employees com- pare their inputs-outcomes ratios to relevant others’ ratios. A perception of inequity will cause an employee to do something about it. Procedural justice has a greater influence on employee satisfaction than does distributive justice.

Expectancy theory says that an individual tends to act in a certain way based on the expectation that the act will be followed by a desired outcome. Expectancy is the effort-performance linkage (how much effort do I need to exert to achieve a certain level of performance); instrumentality is the performance-reward linkage (achieving at a certain level of performance will get me what reward); and valence is the attractiveness of the reward (is the reward what I want).

10.4 Discuss current issues in motivating employees. Most motivational theories were developed in the United States and have a North American bias. Some theories (Maslow’s need hierarchy, achievement need, and equity theory) don’t work well for other cultures. However, the desire for interesting work seems important to all workers and Herzberg’s motivator (intrinsic) factors may be universal.

Managers face challenges in motivating unique groups of workers. A diverse workforce is looking for flexibility. Professionals want job challenge and support, and are motivated by the work itself. Contin- gent workers want the opportunity to become perma- nent or to receive skills training.

Open-book management is when financial state- ments (the books) are shared with employees who have been taught what they mean. Employee recognition programs consist of personal attention, approval, and appreciation for a job well done. Pay-for-performance programs are variable compensation plans that pay employees on the basis of some performance measure.

10.1 Define and explain motivation. Motivation is the process by which a person’s efforts are energized, directed, and sustained toward attaining a goal.

The energy element is a measure of intensity or drive. The high level of effort needs to be directed in ways that help the organization achieve its goals. Employees must persist in putting forth effort to achieve those goals.

10.2 Compare and contrast early theories of motivation. According to Maslow’s theory, individuals move up the hierarchy of five needs (physiological, safety, social, esteem, and self-actualization) as needs are substan- tially satisfied. A need that’s substantially satisfied no longer motivates.

A Theory X manager believes that people don’t like to work or won’t seek out responsibility so they have to be threatened and coerced to work. A Theory Y manager assumes that people like to work and seek out responsibility, so they will exercise self-motivation and self-direction.

Herzberg’s two-factor theory proposed that intrinsic factors associated with job satisfaction were what motivated people. Extrinsic factors associated with job dissatisfaction simply kept people from being dissatisfied.

McClelland’s three-needs theory proposed three acquired needs that are major motives in work need for achievement, need for affiliation, and need for power.

10.3 Compare and contrast contemporary theories of motivation. Goal-setting theory says that specific goals increase performance and difficult goals, when accepted, result in higher performance than do easy goals. Important points in goal-setting theory include intention to work toward a goal is a major source of job motivation; specific hard goals produce higher levels of output than generalized goals; participation in setting goals is probably preferable to assigning goals, but not always; feedback guides and motivates behavior, especially self-generated feedback; and contingencies that affect goal setting include goal commitment, self-efficacy, and national culture.

To check your understanding of learning outcomes 10.1 – 10.4 , go to

mymanagementlab.com and try the chapter questions.

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288 PART FOUR | LEADING

1. I try to perform my best at work. 1 2 3 4 5

2. I spend a lot of time talking to other people. 1 2 3 4 5

3. I would like a career where I have very little supervision. 1 2 3 4 5

4. I would enjoy being in charge of a project. 1 2 3 4 5

5. I am a hard worker. 1 2 3 4 5

6. I am a “people” person. 1 2 3 4 5

7. I would like a job where I can plan my work schedule myself. 1 2 3 4 5

8. I would rather receive orders than give them. 1 2 3 4 5

9. It is important to me to do the best job possible. 1 2 3 4 5

10. When I have a choice, I try to work in a group instead of by myself. 1 2 3 4 5

11. I would like to be my own boss. 1 2 3 4 5

12. I seek an active role in the leadership of a group. 1 2 3 4 5

Understanding Yourself

What Are My Dominant Needs? This instrument was designed to deal with flaws in previous attempts to measure four individual needs: achievement, affiliation, autonomy, and power. These are defined as follows:

Achievement—The desire to excel and to improve on past performance.

Affiliation—The desire to interact socially and to be accepted by others.

Autonomy—The desire to be self-directed.

Power—The desire to influence and direct others.

INSTRUMENT This test contains 20 statements that may describe you and the types of things you may like to do. For each statement, indicate your agreement or disagreement using the following scale:

1 = Strongly disagree

2 = Disagree

3 = Neither agree nor disagree

4 = Agree

5 = Strongly agree

Understanding the Chapter 1. Most of us have to work for a living, and a job is a

central part of our lives. So why do managers have to worry so much about employee motivation issues?

2. Contrast lower-order and higher-order needs in Maslow’s needs hierarchy.

3. What role would money play in (a) the hierarchy of needs theory, (b) two-factor theory, (c) equity theory, (d) expectancy theory, and (e) motivating employees with a high nAch?

4. What are some of the possible consequences of employees perceiving an inequity between their inputs and outcomes and those of others?

5. What are some advantages of using pay-for-performance programs to motivate employee performance? Are there drawbacks? Explain.

6. Many job design experts who have studied the changing nature of work say that people do their best work when they’re motivated by a sense of pur- pose rather than by the pursuit of money. Do you agree? Explain your position. What are the implica- tions for managers?

7. Could managers use any of the motivation theories or approaches to encourage and support workforce diver- sity efforts? Explain.

8. Can an individual be too motivated? Discuss.

9. Do some additional research on ROWE discussed in the chapter opener. Write up your findings in a report. Be sure to cite your information.

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CHAPTER 10 | MOTIVATING AND REWARDING EMPLOYEES 289

13. I push myself to be “all that I can be.” 1 2 3 4 5

14. I prefer to do my work and let others do theirs. 1 2 3 4 5

15. I like to work at my own pace on job tasks. 1 2 3 4 5

16. I find myself organizing and directing the activities of others. 1 2 3 4 5

17. I try very hard to improve on my past performance at work. 1 2 3 4 5

18. I try my best to work alone on a work assignment. 1 2 3 4 5

19. In my work projects, I try to be my own boss. 1 2 3 4 5

20. I strive to be “in command” when I am working in a group. 1 2 3 4 5

Source: T. M. Heckert, G. Cuneio, A. P. Hannah, P. J. Adams, H. E. Droste, M. A. Mueller, H. A. Wallis, C. M. Griffin, and L. L. Roberts, “Creation of a New Needs Assessment Questionnaire,” Journal of Social Behavior and Personality (March 2000), pp. 121–36.

SCORING KEY Add up items 1, 5, 9, 13, and 17. These represent your achievement score. The affiliation score is made up of items 2, 6, 10, 14, and 18 (reverse score 14 and 18). The autonomy score is items 3, 7, 11, 15, and 19. The power score is items 4 (reverse score), 8, 12, 16, and 20. Scores for each will range from 5 to 25.

ANALYSIS AND INTERPRETATION The higher a score, the more dominant that need is for you. For comparative purposes, the researchers used this test with approximately 350 college graduates who averaged 28 years of age. Their average scores were 22.6 for achievement; 16.1 for affiliation; 20.0 for autonomy; and 17.7 for power.

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290 PART FOUR | LEADING

FYIA (For Your Immediate Action)

La Mexican Kitchen

To: Linda Bustamante, Operations Manager From: Matt Perkins, Shift Supervisor

Re: Staff Turnover

HELP! We’ve been having a difficult time keeping our food servers for any length of

time. It seems like I just get them trained and they leave. And we both know that our

servers are a key element in our company’s commitment to excellent customer service.

We can have the best food in town (and do!) but if our servers aren’t motivated to

provide excellent service, we won’t have any customers.

Although these positions pay minimum wage, you and I both know a motivated

server can make additional money from tips. But it seems that this isn’t enough to

motivate them to stay. So what would you recommend? Could you jot down some

ideas about how to better motivate our food servers and send those to me? Thanks!

This fictionalized company and message were created for educational purposes only. It is not meant to reflect positively or negatively on management practices by any company that may share this name.

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CASE APPLICATION

It gets over 777,000 applicants a year. Andit’s no wonder! With a massage every otherweek, on-site laundry, swimming pool and spa, free delicious all-you-can-eat gourmet meals, what more could an employee want? Sounds like an ideal job, doesn’t it? However, at Google, many people are demonstrating by their decisions to leave the company that all those perks (and these are just a few) aren’t enough to keep them there. As one analyst said, “Yes, Google’s making gobs of money. Yes, it’s full of smart people. Yes, it’s a wonderful place to work. So why are so many people leaving?”

Google has been in the top 10 list of “Best Companies to Work For” by Fortune magazine for three years running and was number one on the list for two of those three years. But make no mistake. Google’s execu- tives decided to offer all these fabulous perks for several reasons: to attract the best knowledge workers it can in an intensely competitive, cutthroat market; to help employees work long hours and not have to deal with time-consuming personal chores; to show employees they’re valued; and to have employees remain Googlers (the name used for employees) for many years. But a number of Googlers have jumped ship and given up these fantastic benefits to go out on their own.

For instance, Sean Knapp and two colleagues, brothers Bismarck and Belsasar Lepe, came up with an idea on how to handle Web video. They left Google, or as one person put it, “expelled themselves from paradise to start their own company.” When the threesome left the company, Google really wanted them and their project to stay. Google offered them a “blank check.” But the trio realized they would do all the hard work and Google would own the product. So off they went, for the excitement of a start-up.

If this were an isolated occurrence, it would be easy to write off. But it’s not. Other talented Google employees have done the same thing. In fact, there are so many of them who have left that they’ve formed an informal alumni club of ex-Googlers turned entrepreneurs.

Discussion Questions

1. What’s it like to work at Google? (Hint: Go to Google’s Web site and click on “About Google.” Find the section on Jobs at Google and go from there.) What’s your assessment of the company’s work environment?

2. Google is doing a lot for its employees, but obviously not enough to retain several of its talented employees. Using what you’ve learned from studying the various motivation theories, what does this situation tell you about employee motivation?

3. What do you think is Google’s biggest challenge in keeping employees motivated?

4. If you were managing a team of Google employees, how would you keep them motivated?

Sources: R. Levering and M. Moskowitz, “And the Winners Are…” Fortune, February 2, 2009, pp. 67+; A. Lashinsky, “Where Does Google Go Next?” CNNMoney.com, May 12, 2008; K. Hafner, “Google Options Make Masseuse a Multimillionaire,” New York Times Online, November 12, 2007; Q. Hardy, “Close to the Vest,” Forbes, July 2, 2007, pp. 40–42; K. J. Delaney, “Start-Ups Make Inroads with Google’s Work Force,” Wall Street Journal Online, June 28, 2007; and “Perk Place: The Benefits Offered by Google and Others May Be Grand, but They’re All Business,” Knowledge @ Wharton, http://knowledge.wharton.upenn.edu/article (March 21, 2007).

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