Illinois State University Management Motivation Case Study

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Business Finance

Illinois State University


I attached the question in this link. The case and power point regarding motivation theories in uploaded as well. If you cannot access the link i have posted the question as well. The paper should be about 2 pages singles spaced no more than 2 1/2 pages or less than 2 pages


This case analysis provides the opportunity to apply concepts, theories, and frameworks from the content on motivation. The goal is to use these cases as fodder for demonstrating your understanding of various theories of motivation, and to identify and discuss key issues associated with motivation in the workplace.

Here are the specific parameters of the assignment:

1.Cases: Use either the “Grass is Always Greener…” case or the “Gravity Payments” case – or both, as material for this thought exercise.

2.Objective: Identify 4-5 different situations within these cases that illustrate a particular concept/theory of motivation or key issue/concern in workforce motivation. I.e., like the examples in the content slides of Eliza Doolittle (Pygmalion effect), Peter Gibbons (expectancy theory), Sheldon and Penny (reinforcement theory), or Clark Griswold (entitlement creep).

3.Specifics: For each example, discuss in a paragraph the following:

a.Identify the situation, (very) briefly describing what it is

b.Then describe how it illustrates a particular concept, theory, or issue from the content on motivation. Be sure to be very clear, specific, and precise. E.g., Sheldon is using chocolate as a reward to reinforce desired behaviors in Penny.

c.Provide an analysis or critique of the situation, commenting on the potential effectiveness/ineffectiveness of the policy/program/action or evaluating the sources/causes of the problems or challenges facing the manager and/or organization. E.g., Sheldon is using a continual reinforcement schedule with Penny, which may become predictable and weaken the satisfaction that the rewards (chocolate) provide.

d.Where possible, make suggestions as to what should be done differently. E.g., Sheldon may instead only intermittently reward Penny for desired behaviors; and he may offer several different rewards instead of just chocolate.

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For the exclusive use of s. reddiyar, 2023. W16013 GRAVITY PAYMENTS: $70,000 MINIMUM SALARY COMPANY1 Won-Yong Oh and Youngkyun Chang wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e); Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-01-21 In April 2015, Dan Price, the 30-year-old chief executive officer (CEO), and founder of Gravity Payments, announced an increase in every employee’s wage to US$70,000.2 Every employee, including the lowest-paid clerk and newly hired staff, would receive a minimum annual salary of $70,000 over the next three years. The announcement stunned the employees and triggered a wave of high-fiving and clapping. With this decision, one young entrepreneur in Seattle, Washington, became an instant hero when he issued a direct and adventurous challenge to the long-standing problem of U.S. income inequality.3 However, at the same time, he was experiencing unexpected challenges from different people only a few months after his bold move. Income inequality has been racing in the wrong direction. I want to fight for the idea that if someone is intelligent, hard-working and does a good job, then they are entitled to live a middle-class lifestyle.4 —Dan Price, CEO COMPANY OVERVIEW Gravity Payments was a private credit card processing and financial services company. It was founded in February 2004 by brothers, Dan and Lucas Price. Dan Price, who grew up in Nampa, Idaho, was 19-years old at the time, and a freshman at Seattle Pacific University, a small Christian college. He started the company after finding that small business owners were being overcharged by credit card companies and paying as much as 5 per cent to process their payments. While in high school, Price had worked as a salesperson in a payment processing company in California. Gravity Payments provided a variety of processing and financial services, including credit card processing, POS (point of sales) systems, mobile payments, working capital financing, and gift and loyalty cards.5 The company’s customers were mostly small and medium-sized businesses. By 2008, the company became the largest credit card processor in the state of Washington, serving more than 15 per cent of small businesses in the Seattle area. In June 2010, Price was honoured with the National Small Business Administration’s “Young Entrepreneur of the Year” award.6 His company’s success was mainly due to its low-cost strategy and word of mouth publicity. The company charged less than half of the industry-average processing rate.7 This document is authorized for use only by sri aakash reddiyar in MQM 484 - Building High Performance Orgs 2023 taught by PETER FOREMAN, Illinois State University from Aug 2023 to Feb 2024. For the exclusive use of s. reddiyar, 2023. Page 2 9B16C001 Gravity Payments had had a philanthropic mandate since its beginning, and launched the “Gravity Gives” program in March, 2008. Through this program, 2 per cent of the company’s revenue had been donated to charities, including World Vision, the Fred Hutchinson Cancer Research Center and Northwest Harvest. “We feel that by contributing to organizations that provide aid to children whose basic necessities are not being met, such as food and water, we can help enrich the future,” said Price. “Gravity Payments believes in the benefits of focusing on poverty on both a global and local scale and that it will help encourage our employees as well as our community to commit to creating change so that children everywhere have an equal opportunity to thrive.”8 THE DECISION It was the right thing to do. I want everybody that I’m partnered with at Gravity to really live the fullest, best life that they can. . . . I think that’s the [income level] where you can start to check off those life’s goal boxes — saving for college, buying a home, some of the basics, starting a family. I want everyone to have those basic opportunities.9 —Dan Price, CEO Announcement of the $70,000 Minimum Salary In April 2015, Price set a new minimum salary of $70,000 for all of his 120 employees at Gravity Payments. The idea struck him when one of his friends shared her worries about trying to pay her bills and student loans on an annual income of $40,000. Some of Price’s own employees earned that amount or less. Price decided upon the amount of $70,000 based upon a 2010 study conducted at Princeton University by economist, Angus Deaton and psychologist, Daniel Kahneman, a Nobel laureate.10 According to the study, those who made less than $75,000 were likely to experience emotional pain and job dissatisfaction. However, even if people made more than $75,000, they did not feel any greater level of happiness. Simply put, the study suggested that emotional well-being increased with economic compensation, but only up to the amount of about $75,000. The study concluded that “low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.”11 Before Price initiated the salary increase, the average salary at Gravity Payments was about $48,000, with the lowest salary at around $34,000. Due to Price’s decision, about 30 employees had their paycheques nearly double overnight, and others also received raises to reach the $70,000 level. Ryan Pirkle, the spokesman for Gravity Payments, mentioned that this new minimum wage policy would increase the salary of about 70 employees. The ground-breaking move was met with applause and shouts of joy by many employees. Kevin, a customer operations associate, said in an interview with the media, “I was there at the meeting . . . honestly, I could not believe what I heard, and I think that’s what a lot of people felt. I kinda felt that we needed to get that repeated.” Phillip Akhavan, a staff member in the merchant relations team, who earned an annual salary of $43,000, also said, “My jaw just dropped. . . . This is going to make a difference to everyone around me.” Jamie June, in the marketing department, said, “Dan is just an incredible man in general. He has a really amazing moral compass.”12 The new salary would change employees’ lives. Maria Harley, vice-president of operations said, “I’ve heard things from, ‘I can finally afford to move out of my parent’s home,’ [to] ‘I can finally afford to have a baby,’ we have some people that are parents and really want a good education for their children and feel like they can finally afford that.”13 This document is authorized for use only by sri aakash reddiyar in MQM 484 - Building High Performance Orgs 2023 taught by PETER FOREMAN, Illinois State University from Aug 2023 to Feb 2024. For the exclusive use of s. reddiyar, 2023. Page 3 9B16C001 Overnight, Price became a hero and the “world’s nicest boss.”14 He was portrayed in the media as a young entrepreneur who took the issue of income inequality into his own hands. Most responses were positive, and the company had received overwhelming support through emails from other businesses. Huge publicity from all major national media had generated clear public-relations benefits for the company. After Gravity Payments became a front-page media story, it received more than 5,000 resumes in just one day. Before the announcement, Gravity Payments added 200 clients per month on average. In June 2015, the number grew to 350. Nick Hanauer, an entrepreneur and venture capitalist who supported an idea of a $15 minimum wage, commented on Price’s move, “These individual acts can create a new kind of perception of what’s possible and what’s righteous.”15 The Downside of the $70K Minimum Salary Plan There’s no perfect way to do this and no way to handle complex workplace issues that doesn’t have any downsides or trade-offs. I came up with the best solution I could . . . I know the decision to pay everyone a living wage is controversial. —Dan Price, CEO The implementation of this wage increase was not easy. In order to pay for the increases in employees’ salaries, Price cut his own remuneration from $1 million to $70,000. Also, about 75 to 80 per cent of the company’s $2.2 million profits had to be used. Many questions were raised: Was this a social experiment? Was it a public relations stunt? Or was Price just a nice guy? In addition, not everyone was pleased with his move. Other local business owners and some entrepreneurial CEOs in the same, close-knit, entrepreneurial network complained that his decision made them look stingy. Steve Duffield, CEO of the DACO Corp., who had met Price through the Entrepreneurs’ Organization in the Seattle area, said, “I worry how that’s going to impact other businesses. We can’t afford to do that. For most businesses, employees are the biggest expense and they need to manage those costs in order to survive.”16 Some customers were against the “socialist” gesture and stopped their business with Gravity Payments.17 Other customers withdrew their business due to an anticipation of a fee increase, in spite of the repeated assurances from the company that this would not happen. Complaints even came from Price’s own employees. While 30 or so employees would see their pay nearly double overnight, and about 70 employees also got raises, the remaining 50 were already paid more than $70,000. In fact, according to the New York Times, the company’s two best employees left the company because of Price’s decision.18 For example, Maisey McMaster, who joined Gravity Payments five years earlier and had worked long hours that left little time for her family, was one of them. She said, “He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.”19 McMaster talked to Price after contemplating a fairer proposal. From her view, a fairer proposal was offering smaller raises with the opportunity to gain a future increase with more experience. “He treated me as if I was being selfish and only thinking about myself,” she said. “That really hurt me. I was talking about not only me, but about everyone in my position.” 20 Grant Moran, a web developer whose salary increased from $41,000 to $50,000 (due to the first stage of the pay increase), also expressed concerns, even though he would receive a substantial pay increase from this plan. He opted to leave the company. “I had a lot of mixed emotions. Now the people who were just clocking in and out were making the same as me. It shackles high performers to less motivated team members.” He added, “I was kind of uncomfortable and didn’t like having my wage advertised so publicly This document is authorized for use only by sri aakash reddiyar in MQM 484 - Building High Performance Orgs 2023 taught by PETER FOREMAN, Illinois State University from Aug 2023 to Feb 2024. For the exclusive use of s. reddiyar, 2023. Page 4 9B16C001 and so blatantly. It changed perspectives and expectations of you, whether it’s the amount you tip on a cup of coffee that day or family and friends now calling you for a loan.”21 From McMaster and Moran’s points of view, it was not fair to double the paycheque of someone with the lowest skills, while the longest-serving and highest-skilled employees received a small or no salary increase. Furthermore, even employees who were exhilarated by the raises had new concerns and indicated they were facing a lot of pressure. “Am I doing my job well enough to deserve this? I didn’t earn it,” said Stephanie Brooks, 23, who joined the company as an administrative assistant two months before the decision.22 Lawsuit Filed Dan has taken millions of dollars out of the company for himself while denying me the benefits of the ownership of my shares, and otherwise favouring his own interests as the majority shareholder over my interests.23 —Lucas Price, co-founder and shareholder Lucas Price, Price’s older brother and co-founder of Gravity Payments, owned a 30 per cent share of the company, even though he had not been involved in operational decisions for years. He filed a lawsuit less than two weeks after his brother’s surprising announcement. In his view, this decision was a potential threat to the company’s long-term survival and violated his rights as a minority shareholder. He believed the company was profitable, but not profitable enough to justify such a significant move. It had annual revenue of about $150 million from $6 billion in transactions processing, and the expected profit was only $2.2 million in 2015. Most of the $2.2 million yearly profit would be ploughed into the salary increases. Credit card processing companies had a relatively thin margin structure.24 This family fight over a business became messy and ugly. Dan and Lucas were very close before the former’s surprising move, and Lucas was the best man at his brother’s wedding. However, the lawsuit changed their relationship entirely. Price said, “being in business together was the worst thing for our relationship,” and he asked the rest of the family to give love and support to both Lucas and himself. Their younger brother Alex, who also worked at Gravity Payments, had an up-close view of this family legal fight.25 WHAT’S NEXT? It’s the great paradox of our era. Productivity is at record levels, innovation has never been faster, and yet at the same time, we have a falling median income and we have fewer jobs. People are falling behind.26 —Erik Brynjolfsson, professor, MIT Sloan School of Management When Price made the decision to raise his employees’ salaries, he probably did not anticipate the clamour of the political debate over raising the minimum wage or the growing income gap between the rich and the poor. In the U.S., the average CEO earned nearly 300 times more than average employees, one of the largest disparities in the world. It seemed that Price took the first step to address this problem. On the company’s website, there was a question, “Would you give 90 per cent of your salary away? Will it pave the way for wider pay equality?” Price answered, “I hope so. My goal when making this decision was for other business leaders to recognize you can pay a living wage and not only survive, but thrive.”27 This document is authorized for use only by sri aakash reddiyar in MQM 484 - Building High Performance Orgs 2023 taught by PETER FOREMAN, Illinois State University from Aug 2023 to Feb 2024. For the exclusive use of s. reddiyar, 2023. Page 5 9B16C001 News of his bold move went viral, causing concern and debate over employee morale, work ethic, compensation plans, and the wealth gap in society in general. At first, there was applause for his radical actions. However, with a few employee-relations problems and a lawsuit filed by his brother, opinions were shifting in a more critical direction. Price was experiencing unexpected challenges, only a few months after he made his decision. What should he do in order to deal with different reactions from the company’s employees, customers, media and his brother? ENDNOTES 1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives presented in this case are not necessarily those of Gravity Payments or any of its employees. 2 All figures are in US$ unless otherwise stated. 3 Alvaredo Facundo, Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez, “The Top 1 Percent in International and Historical Perspective,” Journal of Economic Perspectives 27 (2013): 3–20. 4 Patricia Cohen, “A Company Copes with Backlash against the Raise that Roared,” New York Times, July 31, 2015, accessed September 21, 2015, 5 Gravity Payments, accessed September 10, 2015, 6 John Cook, “President Barack Obama Honors 26-year-old Seattle Entrepreneur,” Puget Sound Business Journal, June 8, 2008, accessed September 10, 2015, 7 Lynsi Burton, “Credit Him with Business Savvy,” Seattle Post-Intelligencer, June 22, 2008, accessed September 14, 2015, 8 PR web, “Gravity Payments Focuses Charitable Giving Campaign on Giving Both Locally and Globally,” May 21, 2008, accessed September 16, 2015, 9 Mike Montgomery, “Entrepreneurs Can Learn A Lot about Being Bold from Gravity Payments,” August 6, 2015, Forbes, accessed September 21, 2015, 10 Daniel Kahneman and Angus Deaton, “High Income Improves Evaluation of Life but Not Emotional Well-Being,” Proceedings of the National Academy of Sciences 107, no. 38 (2010): 16489–93. 11 Ibid. 12 Leonardo Blair, “Gravity Payments Owner Drastically Cuts $1M Salary and Sets $70,000 Minimum Wage for Staff . . . Even the Clerk,” The Christian Post, April 7, 2015, accessed September 18, 2015, 13 CBC News, “Gravity Payments CEO Dan Price of Seattle Cuts His Salary to Boost Company's Minimum Wage to $70K,” CBC News, April 15, 2015, accessed September 19, 2015, 14 David Millward, “CEO Who Set $70,000 Minimum Salary Forced to Rent Out His Home after His Business Ran into Trouble,” The National Post, August 3, 2015, accessed September 20, 2015, 15 Montgomery, op. cit. 16 Cohen, op. cit. 17 Millward, op. cit. 18 Cohen, op. cit. 19 Rachel Sugar, “This CEO Raised His Company's Minimum Wage to $70,000 a Year and Some Employees Quit Because of It,” Business Insider, July 31, 2015, accessed September 22, 2015, 20 Cohen, op. cit. 21 Ibid. 22 Ibid. 23 Ibid. (Note: Lucas Price declined to be interviewed, but wrote an email to the New York Times). 24 Steve Tobak, “The Sad Saga of the $70,000 Minimum Salary Company,” Entrepreneur, August 10, 2015, accessed January 9, 2016, 25 Cohen, op. cit. 26 David Rotman, “How Technology Is Destroying Jobs,” MIT Technology Review, June 12, 2013, accessed September 26, 2015, 27 Gravity Payments, “Would You Give 90% of Your Salary Away?” Gravity Payments, July 27, 2015, accessed September 22, 2015, This document is authorized for use only by sri aakash reddiyar in MQM 484 - Building High Performance Orgs 2023 taught by PETER FOREMAN, Illinois State University from Aug 2023 to Feb 2024. Motivation: A Challenge on both sides  Workplace motivation is a constant challenge for everyone  And figuring out how to motivate people has been a question we’ve tried to answer for decades  Peter Gibbons in “Office Space” Motivation: Overview of Issues  Overview  Definition of Motivation  The set of forces that initiate behavior and determine its form, direction, intensity, and duration.  Based on Need  A drive to achieve a specific outcome  A “need deficit” elicits behavior that seeks to satisfy need  Behaviors yield rewards – which satisfy needs  Motivation affects performance  Key management task – identifying sources of motivation and enhancing those in order to improve performance Motivation: Overview of Issues  Certain Assumptions  Re. Human Nature  Re. Attitude-Behavior Relationship  Re. Managerial Role  Classes of Motivational Theories  Content/Needs Theories - focus on “needs”  Process Theories - trying to explain “how”  Environmental Theories – social/situational factors  Types of Management Strategies  Leadership or managerial style  Structure/design of work environment or job  Rewards & incentives Motivation: Assumptions  Re. Human Nature  “Unsatisfied Needs”  Unsatisfied needs create tension and thus motivation  Needs play a lesser role in environmental theories  McGregor’s Theory X & Theory Y  Are people inherently lazy, selfish, hate work, and will only do the bare minimum?  Or, are people basically motivated, ambitious, and want to work hard and do well if given the opportunity? Motivation: Assumptions  Re. Attitude-Behavior Relationship  Causal direction - which affects which?  Most theories based on assumption that attitudes affect behavior, but some are the reverse  Consistency - pressure for cognitive consistency  Seen as driving behavior; plays a greater role in equity theory vis-à-vis needs theories Motivation: Assumptions  Re. Managerial Role  How much influence can a manager have?; I.e., how much can a manager really motivate?  Some would say a lot  Some theories assume strong managerial influence – E.g., expectancy and goal-setting theories  Livingston’s Pygmalion Effect: – expectations of self & others can have significant influence on motivation and performance – self-fulfilling prophecy – i.e., a manager’s expectations of employee alone can increase motivation and thus affect work performance – Eliza Doolittle in “My Fair Lady” – “that’s what you’ve set yourself out to conquer, and conquer it you will”  Others would say not as much as we think  Some theories instead focus on social or situational factors – E.g., equity and reinforcement theories Pygmalion Effect Motivation: Content/Needs Theories  Maslow - Hierarchy of Needs  Five needs – arranged in a hierarchy  physiological, safety, social/belongingness, ego/esteem, self-actualization  Assumption of “pre-potency”  Lower needs must be satisfied first before higher ones become salient (later models relaxed this assumption)  Implications  Managers may be trying to motivate employees (at higher levels) before their lower needs are satisfied  Problems & limitations  Lack of research support for theory – Especially the pre-potency requirement  Also – no role for the environment in determining needs Pre-Potency Maslow’s Hierarchy Motivation: Content/Needs Theories  Maslow - Hierarchy of Needs Motivation: Content/Needs Theories  Herzberg - Motivator-Hygiene Theory  Two main categories  Motivators - affect satisfaction; related to job content – e.g., responsibility, autonomy, recognition, advancement  Hygienes - affect dissatisfaction; related to job context – e.g., salary, work conditions, coworker relationships  Implications  Managers need to target motivators not hygienes  Horizontal job loading (job rotation or enlargement) - does not affect satisfaction; only dealing with hygienes  Vertical job loading (job enrichment) - affects key motivators, e.g., learning and responsibility  Problems & limitations  Some hygienes (esp. money) lead to satisfaction and some motivators (e.g., lack of recognition) lead to dissatisfaction Motivator-Hygiene Factors Motivation: Process Theories  Vroom - Expectancy Theory  Three components contribute to motivation and effort:  Expectancy - effort-performance expectations – To what degree will my efforts affect my performance?  Instrumentality - performance-outcome expectations – To what degree will my performance lead to desired outcomes?  Valence - attractiveness of outcomes – How attractive/important are these outcomes to me?  Implications  Managers can enhance motivation by helping employees increase their expectancies and instrumentalities  Research has demonstrated predictive power of this model  Problems & limitations  Perceptions: do you manage the situation or the perceptions?  Difficult to apply to teams and intangible work; inseparability Expectancy Theory If I work hard, I will master this IT skill Effort If I master this IT skill, I will earn my certification Performance This certification is very important; it will lead to new opportunities Motivation Outcome Expectancy Instrumentality Perceived probability that effective effort will lead to good performance Perceived probability that good performance will lead to desired outcomes Valence Value of desired outcomes to the individual Motivation: Environmental Theories  Adams - Equity Theory  Based on social comparisons:  Comparisons of input-output ratios w/ certain referents  Different types of referents – self (past), others, system Motivation: Environmental Theories  Adams - Equity Theory  Workers seek to adjust ratios when inequity present:  Change their ratios – reduce inputs or change outputs  Change other’s ratios – adjust others’ inputs/outputs  Change referent – pick a different object of comparison  Cognitively distort ratios – either their own or others’ Motivation: Environmental Theories  Adams - Equity Theory  Implications  All about perceptions – managers must be sensitive to any possible perceptions of inequity; consider all referents  Problems & limitations  Manager’s role is very difficult and delicate; fairness is almost impossible to ensure for everyone Motivation: Environmental Theories  Skinner - Reinforcement Theory (operant conditioning)  Three components:  Stimulus – individual performs some behavior  Reinforcement – behavior is reinforced  Response – individual responds to reinforcement  Goal – “shaping” behavior  Reinforced behavior increases motivation – to either increase desired behaviors or decrease undesirable ones  Environmental focus  Total focus on environment - internal cognitions/motives are basically irrelevant  Sheldon and Penny  Using chocolate to “build a better girlfriend” Decrease Behavior Increase Behavior Reinforcement Theory Positive Reinforcement Negative Reinforcement positive behavior followed by the application of positive consequences positive behavior followed by the removal of negative consequences Punishment Extinction negative behavior followed by the application of negative consequences negative behavior followed by the removal of positive consequences Add Stimulus Remove Stimulus Motivation: Environmental Theories  Skinner - Reinforcement Theory (operant conditioning)  Types of Reinforcement:  Positive - delivering positive consequences for desirable  Negative - removing negative consequences for desirable  Punishment - giving negative consequences for undesirable  Extinction - removing positive consequences for undesirable  Key is schedule of reinforcement  When, where, and what are you reinforcing  Continuous v. partial – non-stop or intermittent reinforcing  Fixed v. variable intervals in partial reinforcement  Problems  Motivation or manipulation? – Employees seen as animals or machines instead of humans?  Not really addressing internal motivation – Just training employees to behave in a certain way Motivation: Issues in Rewards/Incentive Plans  Why - what is the core reason for incentive plan?  Typical response:  to align motives of employee & firm;  and to increase employee motivation  Problem of abuse:  Too often plans are actually used to cut costs Motivation: Issues in Rewards/Incentive Plans  Who - whose performance will be rewarded?  Profit- and gain-sharing reward collective performance  But there is often a lack of connection - the performance is beyond the employee’s control (expectancy theory)  Issues of fairness come into play  Are you rewarding the right people (equity theory)? Motivation: Issues in Incentive Plans  What - what exactly will you reward?  Typically, firms focus on quantifiable goals  Financial measures – profitability or cost reductions  Production measures – outputs or productivity (I/O ratios)  But this may lead to “rewarding A while hoping for B”  Workers increase profits or production but with unintended consequences or at greater cost to company than before  Bud Light Clothing Drive  Or in the worst case, employees use the scheme perversely to maximize their personal gain (see Wells Fargo)  Wells Fargo scandal Motivation: Issues in Incentive Plans  What - what exactly will you reward?  Often qualitative goals may be more important  Teambuilding, creativity, learning, critical thinking, etc.  However, rewarding intangibles is difficult  What do you actually measure?  What do you use as a benchmark or standard?  Problems with expectancy and equity theory Motivation: Issues in Incentive Plans  How - what rewards/incentives will you use?  Typically, financial incentives are used  But money and benefits not always motivating (Herzberg)  Recognition/appreciation is often used instead  Also, beware of entitlement creep  People begin to expect bonuses (see equity theory)  Clark Griswold’s Bonus  When & where - how often and by what means?  Issue of schedules & intervals - reinforcement theory  Also, public v. private rewards  Some want rewards made public (recognition)  While for others it is important they be kept private (equity comparisons and jealousy) Motivation: Breakdowns in Incentive Plans  Entitlement creep  Employees begin to see rewards as entitlements  Rewards then serve opposite purpose (Herzberg’s hygienes)  Wrong motivators  Overemphasis on financial rewards  More people making lifestyle choices (low valence of $$)  Lack of “buy-in”  Employees not involved in process of creating plan  Target and incentives not as motivating (goal-setting) Motivation: Breakdowns in Incentive Plans  Weak connection  Indirect link b/t rewards and employees’ work/influence  Less motivation to increase efforts (expectancy theory)  Poor management  Managers often unwilling to put themselves “at risk”  Lack of change in behaviors seen as unfair (equity theory) Motivation: Breakdowns in Incentive Plans  Mixed Outcomes  Performance-based pay may produce mixed results  May lose some people you wanted to keep and vice-versa Below-Average can’t get a better deal and stay Rising Stars feel shafted and leave Top Performers Laggards get discouraged and leave get rewarded and stay Motivation: Managerial Implications  So, what’s a manager to do?  Leadership - relationships  Identify and meet specific needs  Help employee see expectancy relationships  Define clear, challenging goals  Structure/design  Design enriching job and/or work environment  Rewards/incentives  Ensure/improve equity in inputs/outcomes ratios  Carefully provide positive/negative reinforcements  How much can a manager really do?  How much is beyond the control of any manager?  Or are self-fulfilling prophecies stronger than we think?  Implications for expectancy theory & goal-setting
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Explanation & Answer


I. Introduction

Brief overview of the Gravity Payments case.

Mention the application of motivational theories.

Highlight the objective of the analysis.

II. Question 2: Situations

Situation 1: Equalizing Salaries

Explanation of CEO Dan Price's decision.


Application of Herzberg's Motivator-Hygiene Theory.


Analysis of potential impact on motivation.


Recommendations for improvement.

Situation 2: The Employee's Reaction...

Goes above and beyond expectations!


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