How Companies Motivate Employees Through Different Incentives - Research Paper Example

MENT OF PURPOSE: The purpose of this proposal is to report on different styles of incentives and their results that employers design for their employees. I will research current and future incentive plans, as well as interview at least one CEO on the subject. STATEMENT OF PROBLEM: Sometimes people can become bored or unmotivated at work. Employers often overlook employee’s morale as a reason for lack of production. Creating work and personal incentives can motivate and excite people to be more productive and positive every day. AUDIENCE: The audience for this report is any business owner or manager who is looking to motivate their employees to be more creative or more productive. I. Opening Brain drain and employee apathy are two large obstacles to optimum productivity. This becomes an inevitable part of any corporate lifestyle due to the process of completing mundane activities. In order to combat this within employees, companies regularly provide incentivized programs to invigorate productivity within employers. Various subjects that are key to increasing productivity include but are not limited to bonuses, benefits, increased commission, and even the environment (Sheffrin, 2003). Companies regularly promote competition between employees as a means of increasing productivity as well. In fact, there are a myriad of methods that have and can be used as a means of promoting productivity. A. Compensation, bonuses, benefits and their role in motivation employees Over the past decade, companies are demanding more productivity from the workers while compensation is down. This is because of the ever popular law of supply and demand. Indeed, when the job market is low, there is a higher demand for those positions. This means that companies can pay less for the positions available. Since economists consider productivity (i.e., output per hour worked) to be a key economic determinant of living standards, this fast pace would normally have positive implications for the working class. But in reality, the opposite is true because of the bottomed out economy. Benefits also play a vital role in the productivity of workers because that is a value added dimension of healthcare programs (Bandura, 1997). Insofar as higher benefit costs are perpetuated by the escalating cost of health care, the increased dollars being spent on employee benefits do not lead to improved benefits.  Moreover, companies are mandated to make greater contributions into specific benefit pension plans than they did during the stock market boom. Though this may translate into higher compensation costs, it by no means improve living standards and conditions for workers (Sheffrin, 2003). Beyond that point, for the individuals who do not receive benefits from their employers, the estimated total compensation is lagging further behind productivity. The internal link for the lack of compensation growth is due to the lack of jobs available in the market as described earlier.  Employment is still down by approximately 1.2 million jobs since the recession began, which has resulted in many workers lacking the bargaining power to claim their fair and due share of the growing economy (Sheffrin, 2003). As a consequence, most of the benefits of growth have flowed to profits, not compensation. This is because upper level management is still forced to focus on the bottom line for the shareholders, as opposed to the welfare of the employees. In the modern economic climate, the belief that productivity growth will translate into rising living standards across the income spectrum is losing credibility (Bandura, 1997). II. Body A. History of Corporate Incentive Design In terms of Corporate Incentive design, the application of proper motivational techniques can be a daunting and difficult task. When companies attempt to develop a reward system, it can be easy to reward A, while intending to motivate figure B, but unintentionally reap harmful effects that can pose a liability to corporate objectives. Incentive theory in essence means that a person's actions inevitably have social implications (Bandura, 1997). Insofar as an individuals’ actions are positively received by others, people are inclined to act in this manner. Conversely, if their actions are negatively received by society, people are less likely to act in this manner. Goals then function as a stimuli as a means of attempting to get individuals to migrate towards them (Thomas, 2004). But this is only successful insofar as the stimulus has been conditioned to make the person happier. For instance, a person knows that gaining social capital will make them happier. The following sections will analyze various incentive programs for companies in the market. Google Google as a company gave $1,000 cash as a "holiday bonuses" to all of their employees as a 2011 salary increases of at least 10%. The 10% company-wide raise that the company gave to the employees took effect on January 1, 2011. This is a great way of decreasing the turnover rate and encouraging productivity because employees know that if they help the company increase profit, those dividends will be shared with the employees. Google also indicated that it was willing to give each employee an additional raise equivalent to 1 times the amount of the employee's target/projected bonus for the year.  Additionally, the organization indicated that employees will be eligible for additional "merit increases" based on their individual performance. These actions were taken by the company in order to increase the overall amount of income that the individuals will perceive that they are able to get from the company. This leads to increased worker productivity because of the long term future expectations that they anticipate that the company will give them if the stay on. Additionally the potential for merit increases means that the company is attempting to individualize the incentive programs (Olsen, 2003). Toyota Toyota attempted to motivate employees by doing more than just providing monetary compensation. There attempt was to make employees feel more involved in the production process to increase their interest in the output. Toyota then made quality assurance everyone's obligation by allowing any employee to stop the line if an aspect of it was not working well (Liker, 2004). There is nothing as inviting to workers as the perception that their input is not only valued but encouraged. When they are encouraged and enabled to have discussions about the output options and time lines, while have control over their own work life, the company is creating a work environment that that is conducive to worker satisfaction (Liker, 2004). General Electric GE indicates that its primary commitment to building an environment for its employees is based on Integrity in the work place. Therefore all of its efforts are directed towards those ends of ensuring that the individuals not only gets their basic rights fulfilled, but by ensuring that the workers have a dignified work environment. Each employee signs a pledge to what is called “The Spirit and The Letter”. Employees have an avenue of recourse through the ombudsperson process, which encourages any employee to report integrity concerns without fear of reprisal. GE’s concern for their employees extends beyond the work place into their private lives by encouraging their employees to meet their work commitments while balancing their own life responsibilities (Carlson, 1991). As a mechanism for supporting this balance, flexible work arrangements are an integral part of the method through which GE conducts business. The Company also offers many programs and resources to support employees including financial management, family counseling and more. This meets the psychological needs of an employee in the work place. In this scenario, employees are able to feel as if their company cares about their deepest emotional and social needs. This is key to building loyalty within employees (Carlson, 1991). Disney Disney permits their employees intellectual freedom over their work whereby their ideas receive full company support. This is apart of their “Imagineering” program that encourages workers to use their imagination to create new themes and attractions. Imagineers are governed by a few key principles when developing new concepts and improving existing attractions (Gabler, 2007). The company regularly comes across new concepts and improvements to fulfill specific needs. Imagineers are also known for going over ideas and concepts for attractions and shows that never came to fruition. Imagineers are encouraged to follow the principle of “blue sky speculation” which is a method where they generate ideas without respect to limitations. Imagineers typically refer to this as the beginning of the design process. The unique environment created by disney allows their employees to operate under the notion that if it can be dreamt, it can be built (Gabler, 2007). This is a unique benefit for the employees because they feel as if their ideas add value to the company. Which means that individuals feel as if their productivity is uniquely related to the overall success of the company. This makes it that much more encouraging for employees to provide their best ideas for the organization (Gabler, 2007). B. Current Progressive Incentive Designs Progressive Incentive Designs are another method that companies use to invigorate favorable employee behavior. This type of incentive is based on reaching long-term goals such as sales or attendance. Bonuses Bonuses are an effective way of incentivizing productivity within the work force. When employees are able to get bonuses for reaching certain work objectives it increases their overall productivity (Seligman, 1990). Specifically, it maximizes the value of each our they work because they feel as if in the long run, doing extra work will pay off with reaching certain goals. The only potential disadvantage to this form of compensation is the potential for employees to realize that they are not going to reach their goals to get the bonus and their productivity severely declines because they no longer have an incentive to work harder (Seligman, 1990). Vacations Vacations are typically coupled with attendance because it is an attempt to reward employees for their day to day work. Vacation days tend to be paid days off by the company which is critical to ensuring the employee proper time to relax. In the service industry this is particularly important because the absence of an employee makes it harder for the other workers to fulfill the orders of the consumers (Thomas, 2004). Therefore vacation days encourage individuals to attend work on time and every day they are scheduled because they get paid and off from work. This functions as a light at the end of the tunnel for employees who feel as if their life and their job have converged so far that there is not differentiation. Additionally, the longer time that employees spend working, the more time they are given off from work. This progressive reward structure conditions the behavior of employees in order that it reduces the turnover rate (Thomas, 2004). Competition Healthy competition is another progressive incentive design that allows individuals to compete for finite resources. Health competition is always beneficial to a company insofar as it does not trade off with team work. An example of this is sales contests within companies that forces sales staff to compete for finite resources. C. Human Capital Theory Applications Human capital investments is key to building the strength of an existing workforce. A company can either benefit from the quantity of workers they have or the quality of the workers. When companies reach their maximum capacity in terms of the quantity of employees they can have, they begin to invest in human capital to make the individual workers more productive. Investing in Current Employees There are several ways for a company to invest in their current employees including on site job training, offsite job training, reading requirements, vocational training, and further education. These human capital investments serve to make the employee more efficient at their job and in turn a valuable asset to the company. Employees become increasingly loyal when they observe their company making tangible investments in their education. Keeping Current Employees Companies have a need to decrease their turnover rate and retain employees. This is because it is 6x more expensive to hire a new employee then it is to keep an existing employee. Therefore companies that make investments in the training for their personnel benefit from the loyalty that they receive in return. Sending Employees Back to School Education is the best human capital investment that companies can partake. Specifically, sending employees back to school to further their education adds value to their corporate roster. Moreover it encourages students to leverage their knowledge for the benefit of their company. While in school, these students are likely to apply the knowledge they are gaining to the organization that they work for. D. DeLong Company Programs i. Interview of David DeLong C.E.O and President (Insert data from your interview here) E. GE Corporate Incentives i. Interview with GE Healthcare Manager (Insert data from your interview here) F. Findings As a result of this project, I have found that there are various ways for companies to incentivize productivity among employees. While there are some methods that can be applied across the board, the best solutions are the ones that fit the unique situation of the company structure. For example, Disney Imagineering is unique to the environment proliferated by the company. Most employees lose motivation when they feel as if they are apart of the machine. When workers are allowed to feel like individuals G. Proposals Based on the findings, there is one overarching proposal that I have decided will help companies motivate their employees. The solution to worker apathy is creating an emotional attachment between the individual worker and their job. Additionally, beyond the creation of this attachment, the employee should be able to have a clear personal life and clear work life. When individuals are able to separate the two, it maximizes the time they spend at work because that is what that space is dedicated to; the completion of work. Investments in human capital are also essential to the process of motivating employees. It would be benefit an organization that spends an absorbent amount of money on education to make those cost aware to the employee they are being spent on because it makes them feel valuable to the company. III. Closing Summary Incentive programs have progressed from the point of strict behavioral conditioning suggested by psychologist, to a point where companies are becoming more creative and more interactive. Disempowered workers are unmotivated workers, likewise, empowered workers are motivated workers. The trend of work incentive programs has been the empowerment of the workers. Restatement Sometimes people can become bored or unmotivated at work. Employers often overlook employee’s morale as a reason for lack of production. Creating work and personal incentives can motivate and excite people to be more productive and positive every day. Closing Statement The individuals that make up a company contribute to the effectiveness of the organization. It is important for companies to not only screen the individuals that they hire, but for them to ensure that they are regularly checking the morale of the employees to ensure they are being as productive as possible. Companies realize greater profit when they are able to maximize productivity, hence incentive programs and human capital investments come with a calculated ROI. Works Cited Bandura, A (1997), Self-efficacy: The exercise of control, New York: Freeman, p. 604 Carlson, W. Bernard. Innovation as a Social Process: Elihu Thomson and the Rise of General Electric, 1870–1900 (Cambridge: Cambridge University Press, 1991). Gabler, Neal (2007). Walt Disney: The Triumph of the American Imagination. New York: Random House. pp. 276–277. Liker, J. 2004. The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer. Olsen, Stephanie (July 11, 2003). "Google's movin' on up". CNET News (CNET). Retrieved April 8, 2011. Seligman, Martin E.P. (1990), Learned Optimism, New York: Alfred A. Knopf, Inc., p. 101 Sheffrin, Steven M. (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 31. Thomas, Jane. Guide to Managerial Persuasion and Influence. Upper Saddle River, N.J.: Pearson Prentice Hall, 2004. Appendix Here's what our reader says is the internal email from Eric Schmidt: CONFIDENTIAL: INTERNAL ONLY GOOGLERS ONLY (FULL TIME AND PART TIME EMPLOYEES) I’m pleased to share some very, very good news with Googlers worldwide. But first let me say, on behalf of everyone on the management team, that we believe we have the best employees in the world. Period. The brightest, most capable group of this size ever assembled. It’s why I’m excited to come to work every day--and I’m sure you feel the same way. We want to make sure that you feel rewarded for your hard work, and we want to continue to attract the best people to Google. So that is why we’ve decided...to give all of you a 10% raise, effective January 1st. This salary increase is global and across the board--everyone gets a raise, no matter their level, to recognize the contribution that each and every one of you makes to Google. There’s more. We’ve heard from your feedback on Googlegeist and other surveys that salary is more important to you than any other component of pay (i.e., bonus and equity). To address that, we’re moving a portion of your bonus into your base salary, so now it’s income you can count on, every time you get your paycheck. That’s also effective January 1st. You’ll be receiving an email shortly with further details about these changes to your compensation. And one last thing...today we’re announcing that everyone will get a holiday cash bonus, too. Googlers, you are what makes this company great, and our goal here is to recognize you for your contribution, in a way that’s meaningful to you. Thank you for all that you do, and for making Google a place where magic happens. Eric Read more: http://www.businessinsider.com/google-bonus-and-raise-2010-11#ixzz1J9SUW24S Read More