The Factors and Process That Affect Motivation in Organisations - Essay Example

The Factors and Process that Affect Motivation in Organisations Introduction Motivation is a very important topic in management since it is one of the key factors for all employees that can allow them to perform to their highest level in terms of efficiency and output. While there are several cases and the names of many companies can be mentioned when it comes to those who excel at motivating their employees, I feel that GE is the one company which can be used as the poster child for the idea of motivation especially when it comes to the innovative ways in which GE creates positive motivation by rewarding employees who outperform others. GE as a company has been focused on HR and committed to its employees in many ways which go beyond the norms of reward management as compared to other companies. It has an innovative way of rewarding employees who uphold the values considered important by GE and this has given the company the respect and admiration of many business gurus (Demos, 2006). While the rewards for working at GE are many, the reward selection process uses a ranking system which punishes those employees who do not make the reward cut by termination. This has also caused some controversy as it can be seen as negative to the concepts of motivation but the overall effect of GE’s motivation techniques has been very positive and is well regarded by industry experts. GE’s Approach to Motivating Employees Even though management and the rules applicable to motivating people change day to day as discoveries are made in the field (Beardwell &Holden, 1997). As early as the 1930s, GE was focused motivation for labour and had created profit based employee bonuses as well as pension plans. It is difficult to find companies which have innovated to such an extent that their name becomes associated with certain management practices. The vast majority of organizations will fade into history without establishing any leadership in management innovations but GE holds the unique position of not only having an established name, they have been the leaders in employee motivation for the better part of their existence (Colvin, 2006). The CEO of Ogilvy & Mather, Shelly Lazarus has been on the GE board for the past five years. She says that the process of rewarding employees begins as soon as the recruitment process is started. Even being offered a position at GE is a cause for celebration for a person since GE develops leaders who are groomed to take up positions at the head of the company (Colvin, 2006). I agree with this concept and the idea of evaluating employees for rewards as soon as they are recruited goes a long way towards motivating them to work towards something big as soon as they arrive at the company. Employee Recognition The rewards themselves are made public and members of the company are motivated by knowing who they need to emulate in order to be successful, this also inspires people to stay on with the company so they can get the rewards they see others getting (Morris & Colvin, 2006). The idea of rewards being based on the overall merit of an employee is not a new one but GE applies this idea to the letter by heavily rewarding the top 20% and normally rewarding the middle 50%. Their review and evaluation process ensures that no person gets rewarded for mediocre performance and every star in the company if given the attention s/he deserves. At the same time, to keep the bottom of the barrel on their collective toes, GE has the policy of removing the bottom 10% of its employees every year (Welch, 2005). The most interesting aspect of GE’s motivation plan is the public nature and disclosure which follows the evaluation at GE. All divisions at the company are required to list by name, position and compensation the amount of money and bonuses given to the top 20% of the management as well as the bottom 10% (Schmitt, 2001). So if an employee is given some stock in the company as a reward for creating a new product, the information will be disclosed to all member of his/her department to publicly celebrate his/her achievement. I think that this is a good idea if there is no element of jealousy involved and those who see it happening know that the reward was justified. While this public disclosure may be seen as difficult to swallow, Jack Welch defends this by saying that even though we may seek to protect the reward system from criticism by not letting others know about the bonuses and rewards given to their coworkers, people seem to know this information anyways. By making it public, the information can be used as a motivational factor and it lets all employees see which persons are the stars of their divisions and who are facing the risk of being let go (Welch, 2005). Therefore, as recommended by Boxall and Purcell (2003) GE is using rewards as a tool for strategic management as well as motivation. Jack Welch, the most well known and outspoken CEO of GE wrote very clearly about differentiation and rewarding employees when he said: “When people differentiation is real, the top 20 percent of employees are showered with bonuses, stock options, praise, love, training, and a variety of rewards to their pocketbooks and souls. There can be no mistaking the stars at a company that differentiates. They are the best and are treated that way” (Welch, 2005, Pg. 41). A bonus is a lump sum payment which is significant enough for an employee to motivate him/her. Clearly a hundred dollar bonus would do little to motivate an employee who makes $100,000 per annum but a $20,000 bonus would be certainly useful. None of the sources given declare the exact amount of bonuses per salary bracket at GE but Grote (2002) says that the useable figures for realistic and motivating bonuses are between 9-12% of the person’s yearly income. This is a significant amount and GE uses them as a reward tool at the end of a quarter for those employees who show their commitment to the company and its values. Motivation through Bonuses GE gives a substantial bonus to their stars to motivate them towards further achievements and greatness. Jack Welch (2005) discusses the case where a scientist working for GE won an award for his achievements in science. Mr. Welch asked that the GE board immediately connect the scientist’s achievements with a large cash bonus since even the Nobel peace prize comes with a significant dollar figure attached to it. Kerr (1996) is in complete agreement with this idea and states that variable compensation and bonus awards are unlikely to change a person’s behavior permanently unless the sums are at least 10-12% higher than what their base salary would get them. Unlike GE, the industry average for bonuses, stock options and profit sharing remains at 7.5% of the compensation figures. Kerr (1996) gives examples from his own experiences at GE where rewards and raises in salaries were unlinked from promotions. At one point, GE had nearly thirty different salary ranges but they were combined and mixed to reduce that number to six. People at GE could strive for and be rewarded with increased salaries while not being forced to fight for a position higher up on the organization chart. This must have been a very difficult task for GE to perform due to the sheer size of the company. We know that a large number of people in a company and the nature of positions within an organization will often create many salary ranges but even with thousands of employees across the world, GE manages their salary structure with just six ranges. By default, this also makes the company have a nearly flat hierarchical structure which makes it work more like a small company than a giant organization. Employees gain the benefit of empowerment which also works as a motivational tool. Stock Options Giving stock options as a reward has benefits for the employee as well as the employer since they are easy for the employer to give in terms of real money and not only give the employee a source of cash, they also give the employee a sense of ownership and stake in the company. I can appreciate the fact that the rewards given to the stars are not limited to money (even though that is a big factor for motivation) since other influences like appreciation and training can also serve as rewards for many of the same people. GE is generous with stock options and does not reserve them for members of the board or for employees who rise above a certain level in the company. Most importantly, the heaviest rewards are not given for the duration of time a person spends with the company or how many people they have working for them; instead, they are given only to those who show the best results. This system ties in with the theoretical motivational premise that efforts which are heavily rewarded tend to be repeated by those who get the reward. The values of the company as given by Welch (2005) come across clearly with this compensation and reward system since it shows that GE gives more importance to performance as compared to seniority to make their compensation system be a variable system rather than a static one. The Quick Thanks Program Another key factor about the system of rewards at GE is the response time for the reward to come as a result of performance. The calendar is a useless tool for rewards at GE since a delayed reward loses its effects. Kerr (1996) uses the example of rewarding rats in a cage for pulling a lever and says that if a sugar cube comes 9 months after the lever was pulled there would be little association between the two actions. In certain companies, the reward process is so far delayed that when an extra sum comes up in the employee’s paycheck, they are not sure why it has happened. Good companies make their HR policies effective and practical as well as quick (Torrington & Hall, 1995). Kerr (1996) gives an inside view of what happens at GE where a program called “Quick Thanks!” is in place. This system allows employees to nominate other employees (even across departments) with a $25 gift certificate for certain stores and restaurants in appreciation of their work. In 1995, ten thousand such certificates were handed out by GE employees to their peers. Even though it may seem like a huge number, the rewards are only given for exemplary performance and the peers are not free with their recognition. They often have stricter personal criteria for giving these certificates and the receiver often gets the award from the person who nominated them (Kerr, 1996). It is to GE’s credit that their differentiation system for creating motivation and managing the rewards given to employees has been respected, tested and accepted by some of the biggest names in the world. This ranking system for bonuses etc is used by Microsoft, Cisco, HP, Sun, Capital One, PepsiCo and Intel amongst many others. Sun exactly mirrors GE’s system to discriminate employees by saying that 20% are superior, 70% are “Sun Standard” and 10% are underperforming. On average a quarter of all the companies in the Fortune 500 list have established this practice of division as a reward management standard (Grote, 2002). Conclusion Jack Welch himself reports that he has often been criticized for taking a stand for the differentiation system for rewarding employees and he has been told that the system is cruel, inefficient, mean, impractical, political, unfair and Darwinian (Welch, 2005). However, this criticism comes from GE’s system of systematically removing the bottom 10% of the pile over time, not for rewarding the top 20%. But Jack Welch insists that this is a critical part of the overall rewards process and in his final letter to the company’s stock holders he wrote that: "A company that bets its future on its people… …must remove that lower 10 percent, and keep removing it every year--always raising the bar of performance and increasing the quality of its leadership." (Grote, 2002, Pg. 41-41)” Therefore, the reward system is intrinsically linked to the philosophy of the company to improve itself using differentiation and if that means making some tough decisions, they have to be made quickly and efficiently. Overall, I feel that the systems used for motivating employees at GE are very good and the appreciation given to GE speaks for itself. Works Cited Beardwell I. and Holden L. 1997, Human Resource Management: A contemporary Perspective, 2nd Ed. Pitman: London Boxall P. and Purcell J. 2003, Strategy and Human Resource Management, Palgrave & Macmillan: New York Colvin, G. 2006. What Makes GE Great? Fortune, vol. 153, no. 4, pp. 90-96. Demos, T. 2006, The World’s Most Admired Companies. Fortune. vol. 153, no. 4, pp. 72. Grote, D. 2002, Forced Ranking: Behind the Scenes, Across the Board, vol. 39, no. 6, pp. 40-46. Kerr, S. 1996, Risky business: The new pay game. Fortune, vol. 134, no. 2, pp. 94-97. Morris, B. and Colvin, G. The GE Mystique. Fortune, vol. 153, no. 4, pp. 98-104. Schmitt, J. 2001. Welch has a lesson, even for small shops, Contractor Magazine, vol. 48, no. 10, pp. 16. Torrington D. and Hall L.1995, Personnel Management: HRM in Action, 3rd Ed. Prenetice Hall: London Welch, Jack. 2005. Winning. HarperCollins: New York. Read More