Incentive System for a Small Sandwich Company - Assignment Example

Q1 - If you had to develop an incentive system for a small sandwich company, which elements from which motivation approaches or theories would you use? Why? Would your choice be the same if it was a software design firm? Theories of motivation fall in to content or process theories. They can further be discussed within a grouping of need theories, incentive theories, expectancy theories and cognitive theories (Hodgetts et. al., 2006) defined content theory as “one which explains work motivation in terms of what arouses, energizes, or gives incentive to employees” (Hodgetts et.al., 2006 p.370). Content theories assume that people strive to satisfy a range of their needs (Rollinson, 2005) and the needs will determine the "motivational value" of incentives which are geared towards fulfilling the needs (Blizzard, 1998). On the other hand, the incentive theories looked at external stimuli that affect behavior (Blizzard 1998). These theories were based on the premise that consequences and rewards were major influencing factors of people's actions (Rollinson, 2005). The Equity theory is also another approach to understanding motivation. As per this theory, employees compare their outcomes and incomes to that of fellow workers (Gartner et. al., 1989). The results can be either that an employee works harder intending to adjust the outcomes, or they may alter their perception of fairness of the rewards and incentives for the work they put in. In developing a remuneration system, it is important to consider the motivational aspects involved, in order to ensure effectiveness of the system. Remuneration is one of the key elements which provides the reinforcement needed to ensure company goals are achieved (Weiss, 2001). When designing an incentive system for a small sandwich making company, we can consider many elements from various motivational theories. One of the first elements to consider as per Hertzberg’s two factor theory is that remunerations are in fact a “hygiene factor” which is a prerequisite in an organisational environment without which employees will be dissatisfied and de-motivated. Another element from motivational theories which has relevance in designing this remuneration system is the Expectancy Theory of motivation. It aims to understand how individuals make decisions regarding various behavioral alternatives. For example, the behavioral alternatives for the Sandwich company workers will be to work diligently, ensuring hygiene and quality of food being prepared vs. average or below average performance. The theory suggests that when deciding among behavioral options, individuals select the option with the greatest motivation forces (MF). Motivational Force is defined as a function of three factors: Expectancy, Instrumentality and Valance. Expectancy refers to the Probability of the desired outcome. That is the belief that one's effort will result is attainment of desired performance goals. This belief, or perception, is generally based on an individual's past experience, self-confidence, and the perceived difficulty of the performance standard or goal. Therefore, the remunerations should be linked to tasks which the staff is capable of performing and they should receive proper training. The employees must also have a sense of trust in the management to execute the remuneration system efficiently and effectively without bias. The instrumentality is the belief that by meeting the performance expectations, a greater reward will be forthcoming. This should be made clear by remuneration policies and clear cut reward systems. The valance refers the value of the reward to the individual and will is a function of his or her needs, goals, values and sources of motivation. (Weiss, 2000). The Equity theory is also another approach to understanding motivation. As per this theory, employees compare their outcomes and incomes to that of fellow workers (Gartner et. al., 1989). The results can be either that an employee works harder intending to adjust the outcomes, or they may alter their perception of fairness of the rewards and incentives for the work they put in. They expect to see a balance between inputs and outputs and the perception of fairness in relation to comparisons with that of the coworkers. The fairness is also expected in term of external job market conditions. Hence, the Sandwich Company needs to take in to consideration the current pay rates for similar positions in similar firms in food service industry. If the remuneration system was being developed for a software firm, still these elements of motivational theories cited above will be valid choices. Reason behind such relevance is that the Expectancy theory, equity theory and 2 factor theory address elements of motivational theories which are relevant to any type of employment. Unlike some need based theories such as Maslow’s hierarchy of needs where the need hierarchy differs as per different type of employees and their social and economic background as well as educational levels and caliber of them, the situational specifics are already built in to expectancy or equity theories. The equity theories hold especial importance to organizations such as software firms that employ knowledge workers. References: Blizzard, E. M. (1998) ‘An Investigation Of Employee Motivation, Employee Attitude And Managerial Styles’ A M.Sc Dissertation. Kutztown University – Pennsylvania Gartner, H., Mahler. J & Nichols, J. (1989). Organizational Theory, A Public Perspective. California: Broads Publishers. Hodgetts, R., Luthan, F & Doe, J., (2006) International Management:  Culture, Strategy, And Behaviour. 6th Ed. New York: Mcgraw-Hill Higher Education. Rollinson, D., (2005) .Organizational Behavior, And Analysis An Integrated Approach. 3rd Ed. London: Prentice Hall (Financial Times). Weiss, J.W. (2001) Organizational Behavior & Change, 2nd ed. Ohio: South-Western Collage Publishing. Q2 - The late Peter Drucker, an eminent management author, identified the SMART format for setting goals back in 1954: S (specific), M (measurable), A (attainable), R (relevant), and T (time bound). Is this format relevant today? Discuss. Goal setting is an important part of organisational and employee performance. According to Peter Drucker, goals which are SMART can provide motivation for the employees. SMART goals are those which are Specific, Measurable, Assignable, Realistic, and Time Bound (Doran, 1981). Even though the concept of SMART goals was proposed back in 1954, its relevance to modern day management remains in the same magnitude. Whether it is 5 decades back or in today’s context, the goals set for employees and organisations need to be target specific and refer to identifiable areas of improvements which the employees need to work towards achieving (Weiss, 2000). For instance, if the employees were given an objective to “improve sales revenue substantially”, this is not a SMART goal. It is not specific enough for the employees to understand the exact expectations involved. Without such understanding, the level of expectancy (the belief that efforts will lead to performance) and self-efficacy will be low, reducing the goal commitment (Locke & Latham, 1990). On the other hand, if the goal was to be specific, as “Increase sales revenue generated from the Spa product division by 15% within the next operational quarter”, then this is a SMART goal for the employee or the entire SPA product sales team. They should also be measurable and quantifiable so that objectives can be later evaluated in terms of effectiveness in achievement. When the goal is quantified, the target vs., the achievement deviance can be measured during and after the set time period, it facilitate the monitoring and evaluation of the success rate of goal achievement (Weiss, 2000). In the above cited two examples of goals, when we state a goal as “improve sales revenue substantially”, there is no measurability in this goal. Such a subjective goal will fail to increase employee motivation levels as their confidence in being able to achieve “substantial” increase may be low. According to expectancy theory of motivation, people are motivated when they know that their efforts will lead to the desired target and they feel confident in their skills and capabilities in achieving it. Objectives need to be assignable to an individual or a team so that the required actions to achieve the objectives can be executed. When a goal is assigned to an individual or a team, the responsibility of achieving it lies with them. When rewards are linked to achievement of these goals, such assigned responsibilities become a source of motivation. When goals are being assigned to teams, the team members need to share the responsibility as well as the rewards involved. The motivation derived from team goals can be high or low depending on the cohesion and harmony in the team. If there are many free riders within a team, then such team goals may prove less motivating. The objectives being set must essentially be realistic in terms of resource requirements, time frame and other aspects. They should challenge the caliber and capabilities of the individual or the group to be a source of motivation, yet be within the threshold of being realistic and possible (Locke et.al, 1981). If the 15% sales increase in SPA product groups within next quarter is a goal set for a product line that has had 2-3% growth or negative growth in the past couple of years, and assigned without a massive advertising and promotional budget or the increase manpower to increase distribution or sales calls etc. then this is an unrealistic goal. However, if the 15% target is set for a product line that is in its growth phase and having high consumer response, as well as being supported by high promotional budget and required sales team members, then, it can be taken as a realistic target. Finally, the set goals should essentially be time bound. They should be related to a particular period of time and the evaluation of set goals vs. achieved goals should be carried out at the end of this time period for which the goal is linked to. Having discussed the elements of SMART goals proposed by Peter Drucker almost 5 decades back, we can see that the relevance and significance of SMART goals to modern day organisational context remains the same. References: Doran, G. (1981). Management Review. New York: American Management Association. Locke, E. and Latham, G. (1990). A Theory of Goal Setting and Task Performance. Englewood Cliffs, N.J: Prentice Hall. Locke, E., Shaw, K, Saari, L. and Latham, G. (1981). “Goal Setting and Task Performance: 1969-1980,” Psychological Bulletin. page. 129. Weiss, J.W. (2001) Organizational Behavior & Change, 2nd ed. Ohio: South-Western Collage Publishing. Read More