MCom I Semester Motivation Concepts Application Study Material Notes

MCom I Semester Motivation Concepts Application Study Material Notes: Management bt objectives what is MBO Linking MBO and Goal Setting Theory MBO in Practice Employee Recognition Programs What are Employee Recognition programs Joob redesign and Scheduling Programs Linkgin job redesign and scheduling to motivation Theories :

BBA I Semester Managerial Economics Monopoly Pricing Study Material Notes

Management by Objectives

Goal-setting theory has an impressive base of research support. But as a manager, how do you make goal setting operational? The best answer to that question is: Install a management by objectives (MBO) program. MTW Corp., a provider of software services mainly for insurance companies and state governments, has an MBO-type program.- Management attributes this program with unlocking its workers’ potential, helping the company average an astonishing 50 percent a year growth rate for five years in a row, and cutting employee turnover to one-fifth of the industry norm.

Motivation Concepts Application

What Is MBO?

Management by objectives emphasizes participative set goals that are tangible, verifiable, and measurable. It’s not a new idea. In fact, it was originally proposed 50 years ago as a means of using goals to motivate people rather than to control them.”

MBO’s appeal undoubtedly lies in its emphasis on converting overall organizational objectives into specific objectives for organizational units and individual members. MBO operationalizes the concept of objectives by devising a process by which objectives cascade down through the organization. As depicted in Exhibit 7-1. the organization’s overall objectives are translated into specific objectives for each succeeding level (that is, divisional, departmental, individual) in the organization. But because lower unit managers jointly participate in setting their own goals, MBO works from the “bottom up” as well as from the top down.” The result is a hierarchy that links objectives at one level to those at the next level. And for the individual employee. MBO provides aspect persona performance objectives.

There are four ingredients common to MBO programs. These are goal specificity, participative decision making, an explicit time period, and performance feedback.”

The objectives in MBO should be concise statements of expected accomplishments. It’s not ade quate, for example, to merely state a desire to cut costs, improve service, or increase quality. Such desires have to be converted into tangible objectives that can be clearly measured. To cut departmental costs by 7 percent to improve service by ensuring that all telephone orders are processed, urithm 24 hours of receipt, or to increase quality by keeping returns to less than 1 percent of sales are exam ples of specific objectives.

The objectives in MBO are not unilaterally set by the boss and then assigned to employees. MBO replaces imposed goals with participative determined goals. The manager and employee jointly choose the goals and agree on how they will be measured.

Motivation Concepts Application

Each objective has a specific time period in which it is to be completed. Typically the time period is three months, six months, or a year. So managers and employees have specific objectives and stipulated time periods in which to accomplish them.

The final ingredient in an MBO program is feedback on performance. MBO seeks to give continuous feedback on progress toward goals. Ideally, this is accomplished by giving ongoing feedback to individuals so they can monitor and correct their own actions. This is supplemented by periodic managerial evaluations, when progress is reviewed.

Linking MBO and Goal-Setting Theory

Goal-setting theory demonstrates that hard goals result in a higher level of individual performance than do easy goals, that specific hard goals result in higher levels of performance than do no goals at all or the generalized goal of do your best,” and that feedback on one’s performance leads to higher performance. Compare these findings with MBO.

MBO directly advocates specific goals and feedback. MBO implies, rather than explicitly states, that goals must be perceived as feasible. Consistent with goal setting, MBO would be most effective when the goals are difficult enough to require the person to do some stretching.

The only area of possible disagreement between MBO and goal-setting theory relates to the issue of participation-MBO strongly advocates it, while goal-setting theory demonstrates that assigning goals to subordinates frequently works just as well. The major benefit to using participation, how ever, is that it appears to induce individuals to establish more difficult goals.

Motivation Concepts Application

MBO in Practice

How widely used is MBO? Reviews of studies that have sought to answer this question suggest that it’s a popular technique. You’ll continue to find MBO programs in many business, health-care, educational, government, and nonprofit organizations.

MBO’s popularity should not be construed to mean that it always works. There are a number of documented cases in which MBO has been implemented but failed to meet management’s expectations. A close look at these cases, however, indicates that the problems rarely lie with MBO’s basic components. Rather, the culprits tend to be factors such as unrealistic expectations regarding results, lack of commitment by top management, and an inability or unwillingness by management to allocate rewards based on goal accomplishment. Failures can also arise out of cultural incompatibilities, as noted in the previous chapter. For instance, Fujitsu recently scrapped its MBO-type program because management found it didn’t fit well with the Japanese culture’s emphasis on minimizing risk and long-term goals.

Motivation Concepts Application

Employee Recognition Programs

Ranjit makes only Rs 200 per day at a fast-food court and the job isn’t very challenging or interesting Yet Ranjit talks enthusiastically about his job, his boss, and the company that employs him. “What! like is the fact that Guy [his supervisor) appreciates the effort I make. He compliments me regularly in front of the other people on my shift, and I’ve been chosen “Employee of the Month twice in the past six months. Did you see my picture on that plaque on the wall?

Organizations are increasingly recognizing what Ranjit is acknowledging: Recognition can be a potent motivator

What Are Employee Recognition Programs?

Employee recognition programs cover a wide spectrum of activities. They range from a spontaneous and private thank you” on up to widely publicized formal programs in which specific types of behavior are encouraged and the procedures for attaining recognition are clearly identified.?

Motivation Concepts Application

Linking Recognition Programs and Reinforcement Theory

A few years ago, 1,500 employees were surveyed in a variety of work settings to find out what they considered to be the most powerful workplace motivator. Their response? Recognition, recognition, and more recognition!

Consistent with reinforcement theory, rewarding behavior with recognition immediately following that behavior is likely to encourage its repetition. As previously noted, recognition can take many forms. You can personally congratulate an employee in private for a good job. You can send a handwritten note or an 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 throw a team pizza party to celebrate a team’s accomplishments. They encourage employees to smile by letting customers identify this desirable behavior, then recognize those employees who are identified most often with rewards and publicity.

Motivation Concepts Application

Employee Recognition Programs in Practice

In today’s highly competitive global economy, many organizations are under severe cost pressure They’ve responded with layoffs, wage freezes, and increasing employee work loads. Employees, in are feeling overworked and stressed out. This environment makes recognition programs particularly attractive. Why? Because recognition provides a relatively low-cost means to cumulate employee performance. 10

It shouldn’t be surprising, therefore, to find that employee recognition programs have grown in popularity. A 2002 survey of 391 companies found that 84 percent had some program to recognize worker achievements and that four in 10 said they were doing more to foster employee recognition than they were just a year earlier. A recent study conducted by the Gallup, identified employers recognition as one of the twelve key dimensions that describe great workplaces.

Wipro believes that reward and recognition systems are some of the fundamental ways of improveing motivational level. The company has a unique package called Encore, which is essentially a basket of non-monetary rewards given to motivate employees and recognize excellent work performance. For example, award Feather-in-My-Cap. is an on-the-spot recognition of an effort awarded to a project or project team; Dear Boss recognizes the positives of a good boss, including technical, managerial, and leadership skills, and awards like Mastermind, which notes the most innovative solution or idea in Wipro, and The Wipro Hall of Fame recognizes superlative performers in different roles as well as superlative team performances. 15

In NIIT, there is a practice of naming a conference room or office or training room after the name of the most outstanding employee of the year. The naming is done ceremoniously, the employee’s family is invited, a cake is ordered, and all the emplovees assemble for the felicitation. At Federal Express, rated one of the best work workplaces in India, an employee can get one of Fed Ex’s 500 aero planes named after his/her child. RPG managers give certificates to employees to facilitate small achievements and the good work done by them.

Two of the most popular methods of recognizing employees are by giving gift certificates and cash rewards. The most common reasons for giving an award are length of service and exceptional perfor mance!4. In 1998, Pricewater House had a “Thank You Store” for employees to select gifts and thank you cards for supervisors, managers, and office assistants. Johnson & Johnson has peer-to-peer recog nition programmes, where employees submit nominations on behalf of other employees, teams or oneself. All nominations are reviewed for a Merit Award and all Merit Awards are reviewed for the Chairman’s Award. The Eureka Award at HCL Comnet is for the entrepreneurs who come up with the best business idea. The Value Creator Award is the most coveted and sought after among the awards given in appreciation of extraordinary individual initiative and innovation.

Gotcha recognizes top performers and ranks them on merit. Special vacation packages are given to employees who excel in their targets. Eicher uses a mix of monetary and non-monetary rewards. The financial package helps in sustenance and basic needs fulfillment. The non-financial part helps in recognition and fulfillment of higher order needs. In the non-financial part, Eicher offers perks like study leave, trips, special training, challenging project opportunities, and flexible timings based on individual needs.

Some companies allow executives to make their own mix of salary packages. Some perquisites are offered on a use-or-lose basis. They cannot be monetised, this is to restrict monetisation of perks! which otherwise would increase cash outflows to unacceptable levels. In the year 2000. HICOM introduced three awards for employees who were nominated as ‘best leader’, ‘best motivator’, and ‘best! employee’. In the same year, the company also introduced the new idea of appreciating subordinates! through flower-shaped cards. In addition, the HR department put up a big wallboard titled ‘initiaLivescom’ which was filled with information on the initiatives taken by the employees in the work place and the appreciation of their initiatives. As a policy, the management honors an employee who completes five vears of services in HICOM with a gold plated appreciation plaque 13

Motivation Concepts Application

In spite of its increased popularity, critics argue that employee recognition programs are highly susceptible to political manipulation by management. When applied to jobs for which performance factors are relatively objective, like sales, recognition programs are likely to be perceived by employees

fair. However, in most jobs, the criteria for good performance aren’t self-evident, which allows man wers to manipulate the system and recognize their favorite employees. When abused, this can under mine the value of recognition programs and lead to demoralizing employees

Employee Involvement Programs

At Atlas Container Corp., a 150-employee Maryland-based cardboard box manufacturer, all the employ ees vote on disciplinary policies, whether to keep managers in their jobs, and what equipment to buy At General Electric’s aircraft-engine assembly facility in Durham, North Carolina, the plants 170 employees essentially manage themselves, Jet engines are produced by nine teams of people and they are given just one basic directive: the day that their next engine must be loaded onto a truck. All other decisions are made within the teams. Childress Buick, an automobile dealer in Phoenix, allows its sales people to negotiate and finalize deals with customers without any approval from management. The law of Germany, Belgium, Denmark, Sweden, and Austria require companies to have elected representatives from their employee groups as members of their boards of directors.

The common theme throughout the preceding examples is that they all illustrate employee involvement programs. In this section, we clarify what we mean by employee involvement, describe some of the various forms that it takes, consider the motivational implications of these programs, and show some applications.

Motivation Concepts Application

What Is Employee Involvement?

Employee involvement has become a convenient catchall term to cover a variety of techniques. For instance, it encompasses popular ideas such as employee participation or participative management, workplace democracy, empowerment, and employee ownership. Although each of these ideas has some unique characteristics, they all have a common core-that of employee involvement.

What specifically do we mean by employee involvement? We define it as a participative process that uses the entire capacity of employees and is designed to encourage increased commitment to the organization’s success. The underlying logic is that by involving workers in the decisions that affect them and by increasing their autonomy and control over their work lives, employees will become more motivated, more committed to the organization, more productive, and more satisfied with their jobs.20

Motivation Concepts Application

Examples of Employee Involvement Programs

In this section we review four forms of employee involvement participative management, representative participation, quality circles, and employee stock ownership plans.

Participative Management The distinct characteristic common to all participative management programs is the use of joint decision making. That is, subordinates actually share a significant degree of decision-making power with their immediate superiors.

Participative management has, at times, been promoted as a panacea for poor morale and low productivity. Some authors have even proposed that participative management is an ethical imperative. But participative management is not appropriate for every organization or every work unit. For it to work, the issues in which employees get involved must be relevant to their interests so they’ll be motivated, employees must have the competence and knowledge to make a useful contribution. and there must be trust and confidence between all parties involved.

Why would management want to share its decision-making power with subordinates? There are a number of good reasons. As jobs have become more complex, managers often don’t know every thing their employees do. Thus, participation allows contributions from those who know the most The result can be better decisions. The interdependence in tasks that employees often do today also requires consultation with people in other departments and work units. This increases the need for teams, committees, and group meetings to resolve issues that affect them jointly. In addition, partieipation increases commitment to decisions. People are less likely to undermine a decision at the time of its implementation if they shared in making that decision. Finally, participation provides intrinsic rewards for employees. It can make their jobs more interesting and more meaningful

Dozens of studies have been conducted on the participation-performance relationship. The find inus, however, are mixed. When the research is reviewed carefully, it appears that participation type ally has only a modest influence on variables such as employee productivity, motivation, and job satisfaction. Of course, that doesn’t mean that the use of participative management can’t be beneficial under the right conditions. What it says, however, is that the use of participation is no sure means for improving employee performance

Representative Participation Almost every country in Western Europe has some type of legislation requiring companies to practice representative participation That is, rather than participate directly in decisions, workers are represented by a small group of employees who actually participate. Representative participation has been called “the most widely legislated form of employee involvement around the world. 244

The goal of representative participation is to redistribute power within an orgas nization, putting labor on a more equal footing with the interests of management and stockholders

The two most common forms that representative participation takes are works councils and board representatives. Works councils link employees with manage ment. They are groups of nominated or elected employees who must be consulted when management makes decisions involving personnel. For example, in the Nether lands, if a Dutch company is taken over by another firm, the former’s works council must be informed at an early stage, and if the council objects, it has 30 days to seek a court injunction to stop the takeover. Board representatives are employees who sit on a company’s board of directors and represent the interests of the firm’s employees. In some countries, large companies may be legally required to make sure that employee representatives have the same number of board seats as stockholder repre sentatives.

Motivation Concepts Application

The overall influence of representative participation on working employees seems to be minimal. For instance, the evidence suggests that works councils are dominated by management and have little impact on employees or the organiza tion. And while this form of employee involvement might increase the motivation and satisfaction of the individuals who are doing the representing, there is little evidence that this trickles down to the operating employees whom they represent. Overall, the greatest value of representative participation is symbolic. If one is interested in changing employee attitudes or in improving organizational perfor mance, representative participation would be a poor choice.28

Quality Circles Quality circles became popular in North America and Europe during the 1980.29 They’re defined as a work group of 8 to 10 employees and supervisors, who have a shared area of responsibility, and who meet regularly-typically once a week, on company time and on company premises–to discuss their quality problems, investigate causes of the problems, recommend solutions, and take corrective actions. Quality circles take over the responsibility for solving quality problems, and they generate and evaluate their own feedback, but management typically retains control over the final decision regarding implementation of recommended solutions. It’s not presumed that employees inherently have this ability to analyze and solve quality problems. Therefore, part of the quality circle concept employee involvement A participative representative participation Workers process that uses the entire capacity of participate in organizational decision employees and is designed to encourage making through a small group of increased commitment to the includes teaching participating employees group communication skills, various quality strategies and measurement and problem analysis techniques.

Do quality circles improve employee productivity and satisfaction? A review of the evidence indi cates that they are much more likely to positively affect productivity. They tend to show little or no effect on employee satisfaction; and although many studies report positive results on productivity from quality circles, these results are by no means guaranteed. The failure of many quality circle programs to produce measurable benefits has also led to a large number of them being discontin ued.

Quality circles seem to be a fad that has come and gone. Their demise can be attributed to two flaws. First is the little bit of time that actually deals with employee involvement. “At most, these programs operate for 1 hour per week, with the remaining 39 hours unchanged. Why should changes in 2.5 percent of a person’s job have a major impact?” Second, the ease of implementing quality circles often worked against them.

They were seen as a simple device that could be added on to the organization with few changes required outside the program itself. In many cases, the only sig. nificant involvement by management was funding the program. So quality circles became an easy way for management to get on the employee involvement bandwagon. And, unfortunately, the lack of planning and commitment of top management often contributed to the failure of quality circles.

Employee Stock Ownership Plans The final employee involvement approach we’ll discuss is employee stock ownership plans (ESOPs).35

Employee ownership can mean any number of things, from employees owning some stock in the company at which they work to the individuals working in the company owning and personally operating the firm. Employee stock ownership plans are company-established benefit plans in which employees acquire stock, often at below-market prices, as part of their benefits. Companies as varied as Publix Supermarkets, Graybar Electric, and W.L. Gore & Associates are now over 50 percent employee-owned. But most of the 10,000 or so ESOPs in the United States are m Here are just a few small, privately held companies. 35

Motivation Concepts Application

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. While employees hold stock in their company, they usually cannot take physical possession of their shares or sell them as long as they’re still employed at the company.

The research on ESOPs indicates that they increase employee satisfaction. But their impact on performance is less clear. For instance, one study compared 15 ESOPs against 238 conventional companies. The ESOPs outperformed the con ventional firms both in terms of employment and sales growth. Another study found that ESOPs had total shareholder returns that averaged 6.9 percentage points higher over the four years after the ESOP was set up than market returns of similar companies without an ESOP 5 But other studies have shown disappointing results. 59

ESOP’s have the potential to increase employee job satisfaction and work motivation. But for this potential to be realized, employees need to psychologically expe rience ownership.90 That is, in addition to merely having a financial stake in the company, employees need to be kept regularly informed on the status of the busiValassis ness and also have the opportunity to exercise influence over the business. The evidence consistently indicates that it takes ownership and a participative style of manValassis offers stock options to all agement to achieve significant improvements in an organization’s performance.” employees, from part-time press operators to the chief executive

Indus-League Clothing Limited has an ESOP plan called ‘Indus-League Employees Growth Options-2000’, which covers all the employees of the company. In the first phase, 28 employees of Indus-League who joined the company at the start-up stage were given grant letters. Employees who complete six months of service with the company get the stock options at an exercise price equivalent to the value of the shares at the time of joining the company, and the vesting period be 5 years. The total number of options given to the employee is based on criteria like present and potential contribution to the growth of the company. 13

Since the year 1997, when Tata Technologies achieved its independent status, its revenue has increased almost five times. The company shares its financial success with its employees too. The company announced an employee stock option plan that offers options for up to 10 percent of its subscribed equity to employees. The preferential issue of its equity is offered to all employees. Tata Sons is leading the way in what could perhaps be the largest ever motivational exercise in corporate India. Rattan Tata and three members of Tata Sons suspended all important meetings and agenda for a week and, instead, focused their efforts on communicating with 750 senior managers all over the country about the chairman’s vision for the group. It was a unique one week where 10,000 managers and 260,000 employees came together.” Jindal Steel and Power issued stock options to its employ ees. The company offered 4.5 percent of its existing equity to its employees. Against the prevailing stock price of around Rs 248, the shares were offered at Rs 100. The shares offered under ESOP have a lock-in period of two years. Eligibility is based on the level of seniority of employees. The minimum number of shares to be offered to employees are 100. with revenue growth of around 30 percent for 2001-02, as a direct result of the U.S. slowdown. This is one company that does not want to be stopped!

NIIT Ltd. members will consider through a postal ballot, to grant stock options under employees stock option plan (ESOP) 2005. HCL Technologies has alloted 1.20 lacs equity shares of Rs 2 each to the employees of the company on exercise of their stock options under the 1999 and 2000 employee stock option plans.7 Wipro Ltd. had doubled the number of employees eligible for the company’s ESOP. The policy aims to reward, retain and attract talent and create a sense of owner ship among the company’s employees.

Motivation Concepts Application

Linking Employee Involvement Programs and Motivation Theories

Employee involvement draws on a number of the motivation theories discussed in the previous chapter. For instance, Theory Y is consistent with participative management, while Theory X aligns with the more traditional autocratic style of managing people. In terms of two-factor theory, employee involvement programs could provide employees with intrinsic motivation by increasing opportunities for growth, responsibility, and involvement in the work itself. Similarly, the opportunity to make and implement decisions, and then seeing them work out, can help satisfy an instance, a study comparing the acceptance of employee involvement pro grams in four countries, including the United States and India, confirmed the importance of modifying practices to reflect national culture. Specifically, while American employees readily accepted these programs, managers in India who tried to empower their employees were rated low by those employees; and the use of empowerment also negatively affected employee satisfaction. These reactions are consistent with India’s high power-distance culture, which accepts and expects differences in authority

What about quality circles? How popular are they in practice? The names of companies that have used quality circles reads like a Who’s Who of Corporate America, including Hewlett-Packard, General Electric, Texas Instruments, Xerox, Eastman Kodak, Polaroid, Procter & Gamble, Ford, IBM. Motorola, and American Airlines. But, as we noted, the success of quality circles has been far from overwhelming. They were popular in the 1980s, largely because they were easy to implement. In more recent years, many organizations have dropped their quality circles and replaced them with more comprehensive team-based structures (which we discuss in Chapter 9).

What about ESOPs? Many large, well-known companies have implemented ESOPs, but most tend to be small, private firms.

Motivation Concepts Application

Job Redesign and Scheduling Programs

“Every day was the same thing,” Frank Greer said. “Stand on that assembly line. Wait for an instrument panel to be moved into place. Unlock the mechanism and drop the panel into the Jeep Liberty as it moved by on the line. Then I plugged in the harnessing wires. I repeated that for eight hours a day. I don’t care that they were paying me $24 an hour. I was going crazy. I did it for almost a year and a half. Finally, I just said to my wife that this isn’t going to be the way I’m going to spend the rest of my life. My brain was turning to Jell-o on that jeep assembly line. So I quit. Now I work in a print shop and I make less than $15 an hour. But let me tell you, the work I do is really interesting. The job changes all the time, I’m continually learning new things, and the work really challenges me! I look! forward every morning to going to work again.”

Motivation Concepts Application

What Is Job Redesign and Scheduling?

Frank Greer’s job at the Jeep plant was made up of repetitive tasks that provided him with little variety, autonomy, or motivation. In contrast, his job in the print shop is challenging and stimulating

In this section, we want to look at some of the ways that jobs can be reshaped into order to make them more motivating. First we review three job redesign options-job rotation, job enlargement and job enrichment. Then we look at three popular scheduling options-Ilextime.job sharing, and telecommuting-that all increase employee flexibility.

Job Rotation If employees suffer from overroutinization of their work, one alternative is to use lob rotation (or what many now call cross-training). We define this practice as the periodic shifting of an employee from one task to another. When an activity is no longer challenging, the employee is rotated to another job, usually at the same level, that has similar skill requirements.

The strengths of job rotation are that it reduces boredom and increases motivation through diversifying the employee’s activities. It also has indirect benefits for the organization because employees with a wider range of skills give management more flexibility in scheduling work, adapting to changes, and filling vacancies. On the other hand, job rotation is not without its drawbacks. Training costs are increased, and productivity is reduced by moving a worker into a new position just when his or her efficiency at the prior job is creating organizational economies. Job rotation also creates disruptions, Members of the work group have to adjust to the new employee. And supervisors may also have to spend more time answering questions and monitoring the work of recently rotated employees.

Job Enlargement More than 35 years ago, the idea of expanding jobs horizontally, or what we call job enlargement, grew in popularity. Increasing the number and variety of tasks that an individual performed resulted in jobs with more diversity. Instead of only sorting the incoming mail by department, for instance, a mail sorter’s job could be enlarged to include physically delivering the mail to the various departments or running outgoing letters through the postage meter.

Motivation Concepts Application

Efforts at job enlargement met with less than enthusiastic results. As one employee who expe rienced such a redesign on his job remarked, “Before I had one lousy job. Now, through enlargement, I have threel” However, there have been some successful applications of job enlargement. The job of housekeeper in some smaller hotels, for example, includes not only cleaning bathrooms, making beds, and vacuuming, but also replacing burned out light bulbs, providing turn-down service, and restocking mini-bars. Job Enrichment Job enrichment refers to the vertical expansion of jobs. It increases the degree to which the worker controls the planning, execution, and evaluation of his or her work. An enriched job organizes tasks so as to allow the worker to do a complete activity, increases the employee’s freedom and independence, increases responsibility, and provides feedback so an individual will be able to assess and correct his or her own performance.

How does management enrich an employee’s job? Exhibit 7-3 suggests guidelines based on the job characteristics model discussed in the previous chapter. Combining tasks takes existing and fractionalized tasks and puts them back together to form a new and larger module of work. Forming na ural work units means that the tasks an employee does create an identifiable and meaningful whole Establishing client relationships increases the direct relationships between workers and their clients (these may be an internal customer as well as someone outside the organization). Expanding jobstically gives employees responsibilities and control that were formerly reserved for management Opening feedback channel lets employees know how well they are performing their jobs and whether their performance is improving, deteriorating, or remaining at a constant level.

To Illustrate job enrichment, let’s look at what management at Banc One in Chicago did with its international trade banking department. The department’s chief product is commercial letters of credit essentially a bank guarantee to stand behind huge import and export transactions, Porto chinching jobs, the department’300 emplovees processed documents in an assembly me on with errors creeping in at each handoff. Meanwhile, employees did little to hide the boredom the were experiencing from doing narrow and specialized tasks.

Motivation Concepts Application

Management enriched these jobs by making cach clerk a trade expert who was able to handle a customer from start to finish. After 200 hours of training in finance and law, the clerks became full-service advisers who could turn around documents in a day while advising clients on such arcane matters as bank procedures in Turkey and U.S. munitions’ export controls. And the results? Department productivity more than tripled, employee satisfaction soared, and transaction volume rose more than 10 percent a year.

The overall evidence on job enrichment generally shows that it reduces absenteeism and turnover costs and increases satisfaction, but on the critical issue of productivity, the evidence is inconclusive 59 In some situations, job enrichment increases productivity: in others, it decreases it However, even when productivity goes down, there does seem to be consistently more conscientious use of resources and a higher quality of product or service.

Flextime Susan Ross is your classic “morning person.” She rises each day at 5 A.M. sharp. full of energy. On the other hand, as she puts it, “I’m usually ready for bed right after the 7 P. M. news.”

Susan’s work schedule as a claims processor at The Hartford Financial Services Group is flexible. It allows her some degree of freedom as to when she comes to work and when she leaves. Her office opens at 6 A.M. and closes at 7 P.M. It’s up to her how she schedules her 8-hour day within this 13-hour period. Because Susan is a morning person and also has a seven-year old son who gets out of school at 3 P.M. every day, she opts to work from 6 A.M. to 3 P.M. “My work hours are perfect. I’m at the job when I’m mentally most alert, and I can be home to take care of my son after he gets out of school.”

Motivation Concepts Application

Susan Ross’s work schedule at The Hartford is an example of flextime. The term is short for flexible work hours. It allows employees some discretion over when they arrive at and leave work. Employees have to work a specific number of hours a week, but they are free to vary the hours of work within certain limits. As shown in Exhibit 7-3. each day consists of a common core, usually six hours, with a flexibility band surrounding the core. For example, exclusive of a one-hour lunch break, the core may be 9 A.M. to 3 P.M., with the office actually opening at 6 A.M. and closing at 6 P.M. All employees are required to be at their jobs during the common core period, but they are allowed to accumulate their other two hours before and/or after the core time. Some flextime programs allow extra hours to be accumulated and turned into a free day off each month.

The benefits claimed for flextime are numerous. They include reduced absenteeism, increased productivity, reduced overtime expenses, a lessening in hostility toward management, reduced traffic congestion around work sites, elimination of tardiness, and increased autonomy and responsible ity for employees that may increase employee job satisfaction. But beyond the claims, what’s flextime’s record?

Most of the performance evidence stacks up favorably. Flextime tends to reduce absenteeism and frequently improves worker productivity, probably for several reasons. Employees can schedule their work hours to align with personal demands, thus reducing tardiness and absences, and emploees can adjust their work activities to those hours in which they are individually more productive.

Flextime’s major drawback is that it’s not applicable to every job. It works well with clerical tasks for which an employee’s interaction with people outside his or her department is limited. It is not a viable option for receptionists, sales personnel in retail stores, or similar jobs for which comprehensive service demands that people be at their work stations at predetermined times.

HP India offeres all types of FWOs-from flexitime to sabbaticals. The company allows its employees to start their day within two hours from 8 A.M. on a regular 8-hour working day. The company allows job sharing whereby any two employees could work for 20-40 hours per week on one job. Employees could even work half-a-day in office and the other half from any location. The objective is to facilitate and motivate independent, knowledgeable and creative employees

HP India also provides reduced employment hours and various leave options. Apart from the statutory leaves, the company offers marriage leave of 10 days, study leave for competitive exams for 10 days, eight weeks for legal adoption of a child, and five days each for paternity and bereavement The company also offers leaves beyond the specified time depending on individual requirements

Motivation Concepts Application

The Indian subsidiary of Procter & Gamble, began to offer FWOs in 1999 as a part of adopune the new culture-Stretch, Innovation, and Speed (SIS).” The company offered Wos under the Flexible Work Arrangement (FWA) Scheme. This enabled the company to retain highly talented employees. Also, this made India the best among Asian countries as a global source of talent for P&C It also offered a three-month sabbatical leave to emplovees who had been employed by the company for at least 5 years. P&G introduced the ‘work from home’ option in late 2001. Under this option employees could work from home once a week. P&G also allowed its employees to work halia-day but were pad accordingly.

ICICI offers flexitime as well as the ‘work from home option to their employees. In 2001,8 per cent of ICICI employees availed of these options. It also implemented flexi-hours in the companies formed by a joint venture with other companies, and in its subsidiaries. ICICI offered other FWOs keeping the women employees interests in mind. The company had a higher number of women executives in their senior management cadre than the corporate Indian average of 3 percent. Employees could also work in different shifts at ICICI Bank, which had longer work hours for improved customer service.

The retail industry has longer work hours and also experiences cycles of high and low activity. These characteristics of the industry seemed to have forced it to adopt FWOs. Because the company’s working hours are very long, the retail chains has employees working in different shifts. At Westside, a chain of retail stores, has provision of Flexi-workers. This allows the company to handle peak loads and to be open for longer working hours, Westside also employes people on contractual basis during the peak business season. This also eliminates some of the unnecessary financial bur den of the company.

Many flexi-workers are engaged in selling mutual funds for leading financial service companies. For instance, Rupa quit her job at Tata Yellow Pages after maternity, and started selling mutual funds for ICICI Prudential and holiday resorts for Thomas Cook, GE Capital International Services had also introduced FWOs in early 2001, in its human resources and credit departments. This enabled the company to save costs in terms of support staff for offering professional, medical, provident fund, and other benefits to their employees. It also saved scarce office space. FWOs were also helpful for the dotcom and content development industry. There were many women developing content at home for various dotcoms. The Internet enabled affective global connectivity access, which, in turn, fueled the popularity of FWOS.

Norsk Hydro, one of Norway’s largest companies specializing in oil, fertilizers, gas and electric power, introduced flexitime under the auspicious of a project called Hydroflex in 1998. Under the scheme, employee has the choice of working at the office or from home. To create the home office, the company gives employee a computer, ISDN line and US$2000 to purchase furniture. Working hours is full time, 37.5 hours per week but flexible, depending upon the nature of job, deadlines and productivity goals.

Siemens GEC introduced annual hours concept to meet customer’s preference that telecon installations take place outside working hours. Engineers have 7 choices of annual hours they could work from 1800 to 2520. Having chosen the hours that suited his or her requirement, each engineer was guaranteed the work level for one year and received the same pay each month. For the organization, labor cost was more predictable and there were few incidents of cost over run.

At Kellogg’s as a part of annual hours system, employee work a shift pattern of 12 hours day and night shifts. Instead of overtime, annual-hour includes a quota of “banked hours” which emplovees could be asked to work anytime. The system, which gives long breaks between shift changes, also provides three 18-day breaks during the year and guaranteed earnings. With the scheme, Kellogg’s has gained substantial rise in the capacity of its plant, which now operates 24 hours a day making breakfast cereal mainly for export. For employees, they experience less stress and enjoy stability of higher income.

Motivation Concepts Application

Oueen’s Hospital introduced annual hours concept to work full time for 1950 hours per annum A provisional roster for each month was issued to indicate when they would be available for extra work, and when workload declines. The key benefit is that it enables the hospital to maintain its staffing level at an optimal level to meet the hospital’s workload.

Job Sharing A recent work scheduling innovation is job sharing. It allows two or more individuale to split a traditional 40-hour-a-week job. So, for example, one person might perform the job from A.M. to noon, while another performs the same job from 1 P.M. to 5 P.M., or the two could work full, but alternate, days. As a case in point, Barbara Cafero and Robin Como share the job of accounts contract manager at Xerox Corporation. Barbara Cafero works the first two days of the week, Como the last two, and they work together on Wednesdays. The two women have shared the job for 10 years, negotiating pricing and contract terms for Xerox’s major accounts. With each having children at home, this arrangement allows them the flexibility to better balance their work and family responsibilities.

Job sharing allows the organization to draw on the talents of more than one individual in a given job. A bank manager who oversees two job sharers describes it as an opportunity to get two heads, but “pay for one. It also opens up the opportunity to acquire skilled workers–for instance, women with young children and retirees who might not be available on a full-time basis. Many Japanese firms are increasingly considering job sharing-but for a very different reason. Because

Motivation Concepts Application

Japanese executives are extremely reluctant to fire people, job sharing is seen as a potentially humanitarian means for avoiding layoffs due to overstaffing.

From the employee’s perspective, job sharing increases flexibility. As such, it can increase motivation and satisfaction for those to whom a 40-hour-a-week job is just not practical. On the other hand, the major drawback from management’s perspective is finding compatible pairs of employees who can successfully coordinate the intricacies of one job.67

Telecommuting It might be close to the ideal job for many people. No commuting, flexible hours, freedom to dress as you please, and few or no interruptions from colleagues. It’s called

telecommuting and refers to employees who do their work at home at least two days a week on a computer that is linked to their office.68 (A closely related term–the virtual office is increasingly being used to describe employees who work out of their home on a relatively permanent basis.)

What kinds of jobs lend themselves to telecommuting? Three categories have been identified as most appropriate: routine information-handling tasks, mobile activities, and professional and other knowledge-related tasks.69 Writers, attorneys, analysts, and employees who spend the majority of their time on computers or the telephone are natural candidates for telecommuting. For instance, telemarketers, customer service representatives, reservation agents, and product-support specialists spend most of their time on the phone. As telecommuters, they can access information on their computer screens at home as easily as in the company’s office.

There are numerous stories of telecommuting’s success. For instance, 3,500 Merrill Lynch employees telecommute. And after the program was in place just a year, management reported an increase in productivity of between 15 and 20 percent among their telecommuters, 3.5 fewer sick days a year, and a 6 percent decrease in turnover. Putnam Investments, located in Boston, has found telecommuting to be an attractive recruitment tool. The company was having difficulty attracting new hires. But after introducing telecommuting, the number of its applicants grew by 20-fold. And Putnam’s management calculates that the 12 percent of its employees who telecommute have substantially higher productivity than in-office staff and about one-tenth the attrition rate.

The potential pluses for management of telecommuting include a larger labor pool from which to select, higher productivity, less turnover, improved morale, and reduced office space costs. The major downside for management is less direct supervision of employees. In addition, in today’s team-focused workplace, telecommuting may make it more difficult for management to coordinate teamwork. From the employee’s standpoint, telecommuting offers a considerable increase in flexibility. But not without costs. For employees with a high social need, telecommuting can increase feelings of isolation and reduce job satisfaction. And all telecommuters potentially suffer from the “out of sight, out of mind” effect. Employees who aren’t at their desks, who miss meetings. and who don’t share in day-to-day informal workplace interactions may be at a disadvantage when it comes to raises and promotions. It’s easy for bosses to overlook or undervalue the contribution of employees whom they see less regularly.

Motivation Concepts Application

Linking Job Redesign and Scheduling to Motivation Theories

The guidelines offered in Exhibit 7-8 for enriching jobs are directly related to the job characteristics model. By following these guidelines in redesigning jobs, especially with employees who seek challenge in their work, you’re likely to positively influence the employee’s internal motivation, the quality of work performance, job satisfaction, and reduce both absenteeism and turnover.

The enrichment of jobs can also be traced to Herzberg’s two-factor theory. Following this theory. by increasing the intrinsic factors in a job-such as achievement, responsibility, and growth employees are more likely to be satisfied with the job and motivated to perform it.

A common theme among the scheduling options of flextime, job sharing, and telecommuting is flexibility. Each gives employees greater discretion over when to come to work, how much time is spent at work, or where the work is done. Expectancy theory indirectly addresses flexibility in the importance placed on linking rewards to personal goals. With today’s employees increasingly concerned about conflicting demands from work and personal responsibilities, a flexible work schedule is likely to be perceived as a desirable reward that can help achieve a better work/life balance.”.

Motivation Concepts Application

Job Redesign and Scheduling in Practice

In recent years, job rotation has been adopted by many manufacturing firms as means of increasing flexibility and avoiding layoffs. For instance, managers an Apex Precision Technologies, a custom-machine shop in Indiana, continually train workers on all of the company’s equipment so they can be moved around in response to the requirements of incoming orders. During the 2001 recension Cleveland-based Lincoln Electric moved some salaried workers to hourly clerical jobs and rotated production workers among various machines. This manufacturer of welding and cutting parts was able to minimize layment to continual cross-training and moving workers wherever they’re needed

Job enlargement has never had a large following, especially as a motivating device. This may be due to the fact that, while it attacked the lack of diversity in overspecialized jobs, it did little to instill challenge or meaningfulness to a worker’s activities. In contrast, job enrichment has been widely applied in organizations around the world, Millions of workers today perform jobs that have been enriched using the guidelines presented in Exhibit 7-3. In addition, these enriching techniques seem to have also guided how team activities have been designed in many contemporary organizations.

Flextime has become an extremely popular scheduling option. The proportion of full-time U.S. employees on flextime more than doubled between the late 1980s and 2003. Approximately 45 percent of the U.S. full-time workforce now has flexibility in their daily arrival and departure times. And this is not just a U.S. phe The growing number of firmsnomenon. In Germany, for instance, 29 percent of businesses have flextime for offering flexible work schedules is their employees evidence that employers view this Approximately 31 percent of larveoranizations now offer their employees

work option as a popular in sharing 75 However, in spite of its availability, it doesn’t seem to be widely motivational reward, At Sun Microsystems, 95 percent of adopted by employees. This is probably because of the difficulty of finding co employees take advantage of the potable partners to share a job and the negative perceptions historically held of company’s flextime by scheduling individuals not completely committed to their job and employer. their own work hours. Recent estimates indicate that between 9 million and 24 million people telecommute in the United States, depending on exactly how the term is defined. This translates to about 10 percent or more of the workforce. Well-known organizations that actively encourage telecommuting include AT&T, IBM, Merrill Lynch, American Express, Hewlett-Packard, and a number of U.S. government agencies. The concept is also catching on worldwide. In Finland, Sweden, Britain, and Germany, telecommuters represent 17. 15, 8, and 6 percent of their workforces, respectively.

Motivation Concepts Application

Variable Pay Programs

Why should I put any extra effort into this job?” asked Anne Garcia, a fourth-grade elementary schoolteacher in Denver, Colorado. “I can excel or I can do the bare minimum. It makes no differ ence. I get paid the same. Why do anything above the minimum to get by?”

Comments similar to Anne’s have been voiced by schoolteachers for decades because pay increases were tied to seniority. Recently, however, a number of schools have begun revamping their compensation systems to motivate people like Anne to strive for excellence in their jobs. For instance, Arizona, Florida, Iowa, and Kentucky have introduced state programs that have teacher pay tied to the performance of the students in their classrooms. In California, some teachers are now eligible for performance bonuses as high as $25.000 a year

A number of organizations-business firms as well as school districts and other government agencies–are moving away from paying people based solely on credentials or length of service toward variable-pay programs.

Motivation Concepts Application

What Are Variable-Pay Programs?

Piece-rate plans, wage incentives, profit sharing, bonuses, and gainsharing are all forms of variable-pay programs. What differentiates these forms of compensation from more traditional programs is that instead of paying a person only for time on the job or seniority, a portion of an employees pay is based on some individual and/or organizational measure of performance With variable pay, earnings fluctuate up and down with the measure of performance.

It is precisely the fluctuation in variable pay that has made these programs attractive to manage ment. It turns part of an organization’s fixed labor costs into a variable cost, thus reducing expenses when performance declines. So when the U.S. economy encountered a recession in 2001. companies with variable pay were able to reduce their labor costs much faster than companies that had main tained non-performance-based compensation systems. In addition, by tying pay to performance earnings recognize contribution rather than being a form of entitlement. Low performers find, over time, that their pay stagnates, while high performers enjoy pay increases commensurate with their contribution

Four of the more widely used variable-pay programs are piece-rate wages, bonuses, profit sharing, and gainsharing.

Piece-rate wages have been around for more than a century. They have long been popular as a means for compensating production workers. In piece-rate pay plans workers are paid a fixed sum for each unit of production completed. When an employee gets no base salary and is paid only for what he or she produces, this is a pure piece-rate plan. People who work in ball parks selling peanuts and soda pop frequently are paid this way. They might get to keep $1.00 for every bag of peanuts they sell. If they sell 200 bags during a game, they make $200. If they sell only 40 bags, their take is only $40. The harder they work and the more peanuts they sell, the more they earn. Many organizations use a modified piece-rate plan, in which employees earn a base hourly wage plus a piece-rate differential. So a medical transcriber might be paid $7 an hour plus 20 cents per page. Such modified plans provide a floor under an employee’s earnings, while still offering a productivity incentive.

Bonuses can be paid exclusively to executives or to all employees. For instance, annual bonuses in the millions of dollars are not uncommon in American corporations. For example, Henry R. Silverman, CEO of Cendant, the travel, real estate, and direct marketing concern, received a $13.8 million bonus in 2003 to reward him for increasing total shareholder return by 113 percent over the previous year. Increasingly, bonus plans are taking on a larger net within organizations to include lower ranking employees. Many companies now routinely reward production employees with bonuses in the thousands of dollars when company profits improve.

Profit-sharing plans are organization-wide programs that distribute compensation based on some established formula designed around a company’s profitability. These can be direct cash outlays or particularly in the case of top managers, allocated as stock options. When you read about executives like Sanford Weill, the CEO at Citigroup, earning over $50 million in one year, almost all of this comes from cashing in stock options previously granted based on company profit performance.

A variable pay program that has gotten a great deal of attention in recent years is gain sharing. This is a formula-based group incentive plan. Improvements in group productivity-from one period to another determine the total amount of money that is to be allocated. The division of productivity savings can be split between the company and employees in any number of ways, but 50-50 is pretty typical.

Isn’t gain sharing the same thing as profit sharing? They’re similar but not the same thing. By focusing on productivity gains rather than on profits, gain sharing rewards specific behaviors that ageless influenced by external factors. Employees in a gainsharing plan can receive incentive awards even when the organization isn’t profitable.

Motivation Concepts Application

Do variable-pay programs increase motivation and productivity? The answer is a qualified Yes. For example, studies generally support that organizations with profit-sharing plans have higher levels of profitability than those without them. Similarly, gain sharing has been found to improve productivity in a majority of cases and often has a positive impact on employee attitudes 88 The downside of variable pay, from an employee’s perspective, is its unpredictability. With a straight base salary, employees know what they’ll be earning. They can finance cars and homes based on reasonably solid assumptions. That’s more difficult to do with variable pay. Your group’s performance might slip this year, or a recession might undermine your company’s profits. Depending on how your variable pay is determined, these can cut your income. Moreover, people begin to take repeated annual performance bonuses for granted. A 15 or 20 percent bonus, received three years in a row, begins to become expected in the fourth year. If it doesn’t materialize, management will find itself with some disgruntled employees on its hands.

Motivation Concepts Application

Linking Variable-Pay Programs and Expectancy Theory

Variable pay is probably most compatible with expectancy theory predictions. Specifically, individuals should perceive a strong relationship between their performance and the rewards they receive if motivation is to be maximized. If rewards are allocated completely on nonperformance factors such as seniority or job title–then employees are likely to reduce their effort.

The evidence supports the importance of this linkage, especially for operative employees working under piece-rate systems. For example, one study of 400 manufacturing firms found that companies with wage incentive plans achieved 43 to 64 percent greater productivity than those without such plans. 89

Group and organization-wide incentives reinforce and encourage emplovees to sublimate per sonal goals for the best interests of their department or the organization. Group-based performance incentives are also a natural extension for organizations that are trying to build a strong team ethic. Bu linking rewards to team performance, employees are encouraged to make extra efforts to help their team succeed.

Variable Pay Programs in Practice Variable pay is a concept that is rapidly replacing the annual cost-of-living raise. One reason, as cited earlier, is its motivational power–but don’t ignore the cost implications. Bonuses, gain sharing, and other variable-based reward programs avoid the fixed expense of permanent salary boosts.

Pay for performance has long been used for compensating salespeople and executives. The new trend has been expanding this practice to all employees. IBM, Wal-Mart, Pizza Hut, Cigna Corp., and John Deere are just a few examples of companies using variable pay with rank-and-file employees.90 Today, more than 70 percent of U.S. companies have some form of variable-pay plan: up from only about 5 percent in 1970. Unfortunately, recent survey data indicate that most employees still don’t see a strong connection between pay and performance. Only 29 percent say that when they do a good job, their performance is rewarded.2

Variable pay also seems to be gaining in global popularity. For instance, 21.8 percent of Japanese companies now are now using such pay systems. The rate was less than 10 percent in the 1980s.93

Gainsharing’s popularity seems to be narrowly focused among large, unionized manufacturing companies such as American Safety Razor, Champion Spark Plug. Cincinnati Milacron. Hooker Chemical, and Mead Paper. For instance, among Fortune 1000 firms, approximately 45 percent have implemented gainsharing plans.situation. It replaces the traditional “one-benefit-plan-fits-all” programs that dominated organizam tions for more than 50 years. 105

The average organization provides fringe benefits worth approximately 10 percent of an employee’s salary, Traditional benefit programs were designed for the typical employee of the 1950- male with wife and two children at home. Less than 10 percent of employees now fit this stereotype. While 25 per cent of today’s employees are single, a third are part of two-income families with no children. As such these traditional programs don’t tend to meet the needs of today’s more diverse workforce. Flexible ben elits, however, do meet these diverse needs. They can be uniquely tailored to reflect differences employee needs based on age, marital status, spouses’ benefit status, number and age of dependents and the like.

The three most popular type of benefit plans are modular plans, core-plus options, and flexible spending accounts.104 Modular plans are predesigned packages of benefits, with each module put together to meet the needs of a specific group of employees. So a module designed for single employees with no dependents might include only essential benefits. Another, designed for single parents, might have additional life insurance, disability insurance, and expanded health coverage. Core-plus plans consist of a core of essential benefits and a menu-like selection of other benefit options from which employees can select and add to the core. Typically, each employee is given “benefit credits,” which allow the “purchase of additional benefits that uniquely meet his or her needs. Flexible spending plans allow employees to set aside up to the dollar amount offered in the plan to pay for particular services. It’s a convenient way, for example, for employees to pay for health-care and dental premiums. Flexible spending accounts can increase employee take home pay because employees don’t have to pay taxes on the dollars they spend out of these accounts.

Linking Flexible Benefits and Expectancy Theory

Giving all employees the same benefits assumes that all employees have the same needs. Of course, we know this assumption is false. Thus, flexible benefits turn the benefits’ expenditure into a motivator.

Consistent with expectancy theory’s thesis that organizational rewards should be linked to each individual employee’s goals, flexible benefits individualize rewards by allowing each employee to choose the compensation package that best satisfies his or her current needs.

Flexible Benefits in Practice Today,

almost all major corporations in the United States offer flexible benefits. And they’re becoming the norm in other countries too. For instance, a recent survey of 136 Canadian organizations found that 93 percent have adopted flexible benefits or will in the near term. 105 And a similar survey of 307 firms in the United Kingdom found that while only 16 percent have flexible benefit programs in place, another 60 percent are either in the process of implementing them or are seriously considering them. 106

Summary and Implications for Managers

We’ve presented a number of motivation theories and applications in this and the previous chap ter. Although it’s 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. Don’t treat them all alike. Moreover, spend the time necessary understand what’s important to each emplovee. This will allow you to individualize goals, level of involvement, and rewards to align with individual needs. Also, design jobs to align with individual needs and, therefore, maximize the motivation potential in jobs.

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.

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.

 

Motivation Concepts Application