Despite the controversy over carrot-and-stick motivational practices discussed in the Spot- light on Skills box earlier in this chapter, organizations are increasingly using various types of incentive compensation as a way to motivate employees to higher levels of performance. Exhibit 12.9 summarizes several popular methods of incentive pay.
Variable compensation and forms of “at risk” pay are key motivational tools and are be- coming more common than fixed salaries at many companies. These programs can be ef- fective if they are used appropriately and combined with motivational ideas that also pro- vide employees with intrinsic rewards and meet higher-level needs. Effective managers don’t use incentive plans as the sole basis of motivation. At steelmaker Nucor, for example, the amount of money employees and managers take home depends on company profits and how effective the plants are at producing defect-free steel. However, as described in the preceding example, Nucor doesn’t rely on incentives alone. The company has created one of the most motivated and dynamic workforces in the United States by meeting people’s higher level needs.
Some organizations give employees a voice in how pay and incentive systems are designed, which boosts motivation by increasing people’s sense of involvement and control.55 Managers at Premium Standard Farms’ pork-processing plant hired a consultant to help slaughterhouse workers design and implement an incentive program. Annual pay- outs to employees in one recent year were around $1,000 per employee. More important, though, is that workers feel a greater sense of dignity and purpose in their jobs, which has helped to reduce turnover significantly. As one employee put it, “Now I have the feeling that this is my company, too.”56 The most effective motivational programs typically involve much more than money or other external rewards. Two recent motivational trends are empowering employees and framing work to have greater meaning.
1. EMPOWERING PEOPLE TO MEET HIGHER NEEDS
One significant way managers can meet higher motivational needs is to shift power down from the top of the organization and share it with employees to enable them to achieve goals. Empowerment is power sharing, the delegation of power or authority to subordi- nates in an organization.57 Increasing employee power heightens motivation for task ac- complishment because people improve their own effectiveness, choosing how to do a task and using their creativity.58 Most people come into an organization with the desire to do a good job, and empowerment releases the motivation that is already there. Research indi- cates that most people have a need for self-efficacy, which is the capacity to produce results or outcomes to feel that they are effective.59 By meeting this higher-level need, empower- ment can provide powerful motivation.
Empowering employees involves giving them four elements that enable them to act more freely to accomplish their jobs: information, knowledge, power, and rewards.60
- Employees receive information about company performance. In companies where employees are fully empowered, all employees have access to all financial and operational informa- tion. At Reflexite Corporation, for example, which is largely owned by employees, managers sit down each month to analyze data related to operational and financial per-formance and then share the results with employees throughout the company. In addi- tion to these monthly updates, employees have access to any information about the company at any time they want or need it.61
- Employees have knowledge and skills to contribute to company goals. Companies use training programs to help employees acquire the knowledge and skills they need to contribute to organizational performance. For example, when DMC, which makes pet supplies, gave employee teams the authority and responsibility for assembly-line shutdowns, it pro- vided extensive training on how to diagnose and interpret line malfunctions, as well as data related to the costs of shutdown and start-up. People worked through several case studies to practice decision making related to line shutdowns.62
- Employees have the power to make substantive decisions. Empowered employees have the authority to directly influence work procedures and organizational performance, such as through quality circles or self-directed work teams. At Venezuela’s Aluminio del Caroní, employees participate in roundtable discussions and make recommendations to manage-ment regarding new equipment purchases or other operational matters. In addition, workers vote to elect managers and board members.63 The Brazilian manufacturer Semco pushes empowerment to the limits by allowing its employees to choose what they do, how they do it, and even how they get compensated for it. Many employees set their own pay by choosing from a list of 11 different pay options, such as a set salary or a combina- tion of salary and incentives.64
- Employees are rewarded based on company performance. Organizations that empower work- ers often reward them based on the results shown in the company’s bottom line. For ex- ample, at Semco, in addition to employee-determined compensation, a company profit- sharing plan gives each employee an even share of 23 percent of his or her department’s profits each quarter.65 Organizations may also use other motivational compensation pro- grams described in Exhibit 12.9 to tie employee efforts to company performance.
Many of today’s organizations are implementing empowerment programs, but they are empowering workers to varying degrees. At some companies, empowerment means en- couraging workers’ ideas while managers retain final authority for decisions; at others it means giving employees almost complete freedom and power to make decisions and exer- cise initiative and imagination.66 Current methods of empowerment fall along a continuum, as illustrated in Exhibit 12.10. The continuum runs from a situation in which front-line workers have almost no discretion, such as on a traditional assembly line, to full empower-ment, where workers even participate in formulating organizational strategy. Studies indicate that higher-level empowerment programs, where employees have input and decision-making power related to both everyday operational issues and higher-level strate- gic decisions, are still relatively rare.67
2. GIVING MEANING TO WORK
Another way to meet higher-level motivational needs and help people get intrinsic rewards from their work is to instill a sense of importance and meaningfulness. Fortune magazine finds that one of the primary characteristics shared by companies on its annual list of “The 100 Best Companies to Work For” is that they are purpose-driven, that is, people have a sense that what they are doing matters and makes a positive difference in the world.68
Consider the motivation of employees at Patagonia, which has been a frequent inhabitant of that yearly list.
It is easy to understand why employees at Patagonia feel they are serving an important cause. But managers in any organization can tap into people’s desire to contribute and make a difference. Former Coca-Cola CEO Roberto Goizueta spent a lot of time talking to employees about the company’s charitable work and emphasized that millions of small merchants could make a living because they sold Coca-Cola. Employees at FedEx take pride in getting people the items they need on time, whether it is a work report that is due, a passport for a holiday trip to Jamaica, or an emergency order of medical supplies.69
Another example is Les Schwab Tire Centers, where employees feel like partners united toward a goal of making people’s lives easier. Stores fix flats for free, and some have been known to install tires hours before opening time for an emergency trip. Employees frequently stop to help stranded motorists. Schwab rewards people with a generous profit- sharing plan for everyone and promotes store managers solely from within. However, these external rewards only supplement, not create, the high motivation employees feel.70
In recent years, managers have focused on employee engagement, which has less to do with extrinsic rewards such as pay and much more to do with fostering an environment in which people can flourish. Engaged employees are more satisfied and motivated because they feel appreciated by their supervisors and the organization, and they thrive on work challenges rather than feeling frustrated by them.71 Engaged employees are motivated, en- thusiastic, and committed employees. In addition, there is a growing recognition that it is the behavior of managers that makes the biggest difference in whether people feel engaged at work. When David A. Brandon took over as CEO of Domino’s Pizza, he commissioned research to identify the factors that contributed to a store’s success. What he learned was that the quality of the manager and how he or she treats employees has a much greater impact than neighborhood demographics, packaging, marketing, or other factors.72 Indeed, a Gallup Organization study conducted over 25 years found that the single most important variable in whether employees feel good about their work is the relationship between employees and their direct supervisors.73
The role of today’s manager is not to control others but to organize the workplace in such a way that each person can learn, contribute, and grow. Good managers channel employee motivation toward the accomplishment of organizational goals by tapping into each individual’s unique set of talents, skills, interests, attitudes, and needs. By treating each employee as an individual, managers can put people in the right jobs and provide intrinsic rewards to every employee every day. Then, managers make sure people have what they need to perform, clearly define the desired outcomes, and get out of the way.
One way to evaluate how a manager or a company is doing in engaging employees by meeting higher-level needs is a metric developed by the Gallup researchers called the Q12. When a majority of employees can answer these 12 questions positively, the organization enjoys a highly motivated and productive workforce:
Results of the Gallup study show that organizations where employees give high marks on the Q12 have less turnover, are more productive and profitable, and enjoy greater employee and customer loyalty.75 Many companies have used the Q12 to pinpoint prob- lems with motivation in the organization. Best Buy, for example, uses the survey and includes employee engagement as a key item on each manager’s scorecard. Eric Taverna, the general manager of a Best Buy store in Manchester, Connecticut, took to heart the finding that his employees didn’t think their opinions mattered. Taverna responded by implementing significant changes based on employee ideas and suggestions. The Manchester store’s engagement levels improved significantly, as did the store’s financial performance, while turnover has been substantially reduced.76 When employees are more engaged and motivated, they—and their organizations—thrive.
Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.